Can Long-Only Investors Use Momentum to Beat the US Treasury Market?

Betting against Beta with Bonds: Worry or Love the Steepener?

“…BABgov returns should then correlate positively with risky-asset returns and negatively with financial stress indicators. True, studies have found that GATSM-based term premiums-that is, required excess returnscorrelate negatively with the Chicago Board Options Exchange Volatility Index, the VIX (Li and Wei 2012;Durham 2008). These findings support the story, however, only if decreases in term premiums, scaled by risk, are greater at the back end.…”

“…8. Table 1 also lists the results for a long-short momentum strategy, US Treasury MOM2:12 (i.e., lagged returns from 2 to 12 months prior), which resembles the approach of Durham (2015), who examined "curve momentum" only in the long-only context. This strategy produced some positive…”

“…In fact, Fujiwara, Körber, and Nagakura (2013) reported conditional negative skew for daily government bond excess returns, particularly at short maturities, which may imply greater second-moment-based Sharpe ratios at short horizons, which would be consistent with BABgov. Also, Durham (2008) argued that US Treasury security term premiums positively correlate with Eurodollar option-implied short-term interest rate skew, but Durham did not address the pattern of Sharpe ratios.…”

Factor-based investing in government bond markets: a survey of the current state of research

“…These findings indicate that momentum can be an important factor across asset classes as it has a significant positive loading on equity momentum as well which is also confirmed by the study of Brightman and Shepherd (2016). Furthermore, Durham (2015) shows that momentum produces meaningfully alphas in the US Treasury market. Table 1 summarizes the studies discussed above.…”