Trading the Yield Curve — Strategies

Overview

Active traders use yield curve positioning to profit from changes in the curve's shape. Bullet, barbell, and ladder strategies each respond differently to curve steepening, flattening, and parallel shifts. Before deploying these strategies, make sure you understand the foundational concepts covered in the guide on what the yield curve is. Combine curve positioning with technical indicators to refine entry and exit timing on Treasury futures. Monitor upcoming rate decisions and auction dates on the economic calendar to avoid being caught off guard by parallel shifts.

Key Takeaways

• A barbell strategy profits from curve flattening by holding short and long maturities
• A bullet strategy concentrates around a single maturity for targeted duration bets
• Curve steepener trades go long the front end and short the back end
• Duration-neutral curve trades isolate shape changes from parallel rate moves

Practical Tips

• Use Treasury futures for capital-efficient curve trades
• Monitor Fed dot plots and forward guidance before positioning
• Size curve trades conservatively — moves can be gradual then sudden