What Are We Missing

Finding

The weakest assumption fails in its strongest form: recent evidence does not show that duration has become a uniformly bad hedge, but it does show that long-end duration carries meaningful inflation, supply, and positioning risk.

What changed

Latest available data through August 26 show nominal yields only 7-10 basis points above the late-May comparison, while real yields remain positive across the curve, Treasury-specific foreign demand weakened sharply in June, and the latest 30-year auction cleared with softer coverage.

Decision

Do not change the current action now. Keep a measured trim or hedge of long-end duration, retain some duration as equity-shock insurance, and do not make either a wholesale exit or a fresh duration purchase.

Watch next

Relax the hedge only if disinflation, Treasury demand, long-duration flows, and stock-bond behavior improve together. Increase it if inflation stays sticky and long-end auctions repeat the recent deterioration.

Sources

• bls.gov
• fiscaldata.treasury.gov
• federalreserve.gov
• cftc.gov
• ici.org
• home.treasury.gov
• home.treasury.gov
• home.treasury.gov
• federalreserve.gov
• cnbc.com