§ 01
| Strategy | Structure | Best When | Risk |
|---|---|---|---|
| Bullet | Concentrate around one maturity (e.g., all 5-year) | Curve flattens at your maturity | Poor if curve steepens |
| Barbell | Split between short and long (e.g., 2-year + 10-year) | Curve flattens (long outperforms), volatile rates | Poor if curve steepens |
| Ladder | Equal amounts at each maturity (1, 3, 5, 7, 10) | Uncertainty about rate direction | Doesn’t outperform in any scenario |
§ 02
Barbells have more convexity than bullets at the same duration, which means they outperform in volatile rate environments. But bullets outperform when the curve steepens because they avoid the underperforming short end.
§ 03
Check the current yield curve shape in the **Macro** section. Is it steep, flat, or inverted? A flat/inverted curve favors barbells; a steep curve favors bullets.
§ 04
The yield curve is currently very flat (2-year and 10-year yields are nearly equal). Which strategy benefits most?
§ 05
§ 06
Yield curve is flat (2Y yield = 10Y yield = 4.5%). You can either build a 'bullet' portfolio (all 7Y bonds) or a 'barbell' (50% 2Y + 50% 30Y, duration-matched). What's the difference?
Five questions · AI feedback
Sit with the ideas.
The yield curve is steep (2-year at 3%, 10-year at 5%). You believe the Fed will raise short-term rates, flattening the curve. Which strategy should you use?
Why: