A Simple Treasury Futures Duration Adjustment

Fluctuating interest rates can cause nightmarish losses, high transaction costs, and lost opportunities for the fixed income portfolio manager who wants to maintain an appropriate portfolio duration target. When volatile interest rates challenge even the most skilled fixed-income portfolio managers, CME Group U.S. Treasury futures provide easy, efficient, and flexible means to adjust portfolio interest rate sensitivity. This paper discusses how to manage portfolio duration with Treasury futures while anticipating changes in yields. This is illustrated by two scenarios: Scenario A examines yield-curve flattening during a period of falling interest rates, and Scenario B examines yield-curve steepening during a period of rising interest rates.