Time To Leave U.S. Treasuries For The Duration?

2025-04-03 07:25:00 ET

Summary

• Our Insight assesses recent spread moves and performance of US Treasuries, pointing out that Treasuries were helped by their short duration, when yields rose in 2023-24, despite spreads widening, enabling the WGBI index to outperform WGBI ex-US.
• US Treasury spreads have barely tightened since the Fed began easing in September, challenging previous cyclical patterns.
• Significantly greater duration and convexity of European and UK govt bond markets versus Treasuries would also favour them, in the event easing cycles do gather pace in 2025-26.

By Robin Marshall, Director, Global Investment Research, FTSE Russell

We examine why US spreads haven’t tightened during recent Fed easing and why the WGBI outperformed the WGBI-x US, when the Fed raised rates, perhaps because of Treasuries’ shorter duration and convexity. But that may be a disadvantage if duration becomes the investor’s friend in 2025-26. ...

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