Macro Rates Trend
Follow trend in rates (e.g. 10Y yield or bond futures) with vol-scaled position; capture sustained rate moves.
Thesis (edge)
Rates trend over months; moving average or yield-based signals can capture direction with vol-scaled size. Diversifier to equity trend.
Where it works (regimes)
Works in sustained rate trends (e.g. 2022 bear market in bonds). Fails in choppy, range-bound rate environments and around Fed pivots.
Signals
- 50/200 MA cross on 10Y future or yield; or trend in yield level. Long when above MA, short when below. Size by ATR.
Portfolio construction
Single-asset or curve (2Y, 10Y). Vol target per position. Max leverage cap.
Risk model
Tail: sudden Fed pivot (e.g. 2019, 2023). Use position limits and possibly vol filter.
Costs & implementation
Futures are liquid; roll cost. Moderate turnover. Execution generally good.
Failure modes
Whipsaws around FOMC; overfitting MA lengths; ignoring convexity in bonds.
Our Notes & Suggestions
Test across 2000–2024 to include multiple rate regimes. Consider trend strength filter. Don’t over-leverage; rates can move fast.
Our Notes & Suggestions
See the "Our Notes" subsection in the body above for practical guidance, gotchas, and best practices. Always validate regime assumptions and transaction cost assumptions before scaling.
Implementation Checklist
- Define trend signal (MA cross or yield level)
- Position size by ATR or vol
- Define max position and drawdown stop
- Backtest across rate regimes