May 2024 Index Positioning

Index Updates  •  Positioning Update  •  April 26, 2024

The Index strategy is based on qualitative and quantitative inputs including economic data and interpretations of government policy. Asset allocation guardrails include 50% – 200% allocation relative to the benchmark for credit, duration, and structure/mortgage weight. A high-conviction exposure to more speculative or diversifying positions is constrained to 0% – 20%.

The characteristics below reflect how we would best position a portfolio of fixed-income ETFs to achieve maximum total return over a comparable baseline neutral portfolio of fixed-income securities (benchmark).

  Relative Positioning  



Neutral Duration


Yield Curve



Corporate Credit




Underweight MBS



10% USD Bullish


Neutral Duration

In May, the Index moved from an underweight duration position to neutral. The yield for the 10-year has moved from below 4% last December to over 4.70%.

We have expected the 10-year yield to move to a range of 5.00% to 5.50%, but most of this move is complete. As such, the Index is moving to a neutral duration.


No Curve Position

The Index holds no curve position relative to the benchmark.



90% Underweight Credit

In January, the Index took an underweight position in corporate bonds relative to our benchmark due to record corporate bond issuance and an overbought equity market.

Given similar conditions, the Index will maintain this position.

90% Underweight Securitized

In May, the Index increased its allocation to MBS from 80% to 90%.

Falling volatility (in red, the MOVE Index) helps securitized assets perform better. Elevated volatility is falling because the Federal Reserve’s expected rate cuts are disappearing. Given this, the bond market uncertainty index should fall.

However, as discussed above, if the economy stays strong and inflation surprises, uncertainty is expected to return to the bond market, making more than one rate cut difficult.

10% USD Bullish Conviction Allocation

Last month, the Index added a 10% long U.S. dollar conviction position. This bet would benefit if the U.S. economy outperforms the rest of the world, leading to higher yields and a strong dollar.

The previous 10% short TIPS position has been removed. The Index benefitted from this exposure, however, these securities are now properly pricing expected returns.


Allocation Changes

iShares MBS ETF25.4022.75
iShares 3-7 Year Treasury Bond ETF16.365.21
WisdomTree BBG USD Bullish Fund10.0010.00
Schwab Long-Term U.S. Treasury ETF9.107.75
Vanguard Short-Term Corporate Bond ETF7.656.69
Vanguard Long-Term Corporate Bond ETF7.408.10
Vanguard Intermediate-Term Corporate Bond ETF6.847.00
iShares 7-10 Year Treasury Bond ETF6.356.25
Schwab Short-Term U.S. Treasury ETF5.905.50
iShares BBB Rated Corporate Bond ETF5.005.00
WisdomTree Floating Rate Treasury ETF0.005.75
iShares 0-5 Year TIPS Bond ETF0.0010.00