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June Total Return Notes: Market Transition Lifts Barbells
Long-duration bonds should do well when the end of federal funds rate hikes comes into view and the yield curve is inverted. Even so, the large gains seen in the cash+25-year strip barbell versus the five-year strip bullet is striking. June’s returns on 5-6 year government strips were negative, while the returns for both cash and the 15-20 year government strips were strongly positive. This is about as close to a perfect trade as any bullet/barbell combination is likely to get.