Core Insights - The ongoing question for investors in fixed income is when to go long duration, especially with the Federal Reserve resuming rate cuts [2][3] - The macroeconomic environment suggests limited upside for long duration fixed income strategies, with Treasury yields remaining volatile and near 4% [8][9] Macroeconomic Outlook - The U.S. economy is expected to continue on a modest growth path, with inflation remaining sticky but not significantly impacted by tariffs [3] - The Federal Reserve is cautious about further rate cuts, with some members expressing caution regarding another cut this year [3] Treasury Yield Dynamics - The UST 10-Year yield is currently in a fair-trading range of 4%-4.5%, with recent trading as low as 3.93% [9] - Historical yield curve dynamics indicate a potential rise in the 10-Year Treasury yield, making it an unfavorable environment for reallocating to long duration [8] Trading Activity - Trading activity has been volatile, with approximately 100-basis point swings in yields over the past two years [9] - A long duration position implies a belief that the economy is heading toward a recession, with expectations for the UST 10-Year yield to decline to at least 3.6% [9] Fed Funds and UST 10-Year Yield Spread - Following the recent 25-basis point rate cut, the spread between the Fed Funds mid-point and the UST 10-Year yield is around +20 basis points, significantly below the long-term average of +129 basis points [10] - A potential widening of this spread could place the 10-Year yield in the 4.5%-4.75% range [11] Conclusion - Given the historical performance of long duration strategies and the current macroeconomic outlook, it is recommended to hold off on going long duration [12]