Bond Outlook October 5th
For five months we have recommended a barbell for USD fixed-income. However, the time has come to discontinue the long end as the risk grows of its yield rising.
Bond Outlook [by bridport & cie, October 5th 2005]
For many weeks we have been struggling with the likely development of the US yield curve, and consequently with our recommendation for maturities for USD fixed-income portfolios. Since the end of April 2005, our recommendation has been to "barbell" between floaters and 10 year maturities. This has proven a sound strategy, but, as regular readers will have noted, we have become increasingly uneasy about how long the strategy can remain appropriate. This is because we believe the USD 10 year yield to be vulnerable to a serious break out to higher levels. Consider the following: