Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
5.13Fixed incomeBacktest
Yield curve spread (flatteners and steepeners)
Expecting rates to fall? The curve tends to steepen, so buy the front and sell the back. Expecting rises? Do the opposite. Matching dollar durations removes the bet on parallel moves.
Note. Bonds are constant-maturity Treasuries priced from daily yields (carry + duration + convexity). The rate view is a simple trend in the 3-month bill yield.
Edit anything; the result updates as you type. Lines like window = 20 become sliders.
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Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
- Source
- 151 Trading Strategies
- Section
- 5.13 · Fixed income
- Asset class
- Fixed income
- In the lab
- Full backtest
Yield curve spread (flatteners and steepeners) (5.13)
Expecting rates to fall? The curve tends to steepen, so buy the front and sell the back. Expecting rises? Do the opposite. Matching dollar durations removes the bet on parallel moves.
Key equation
Lab formula
// Steepen when short rates have been falling, flatten when they have been rising
view = sign(-delta(of("3M", yield), 63))
scale(view * (is("5Y") / duration - is("30Y") / duration))Bonds are constant-maturity Treasuries priced from daily yields (carry + duration + convexity). The rate view is a simple trend in the 3-month bill yield.
How the backtest works
The formula is evaluated for every asset on every day. Its values become positions at that day’s close, using the portfolio rule you pick, and earn the next day’s close-to-close return. Costs are charged in basis points on the amount traded. Everything runs in your browser on daily data from Yahoo Finance, adjusted for splits and dividends.
More in Fixed income
- 5.2 Bullets
- 5.3 Barbells
- 5.4 Ladders
- 5.5 Bond immunisation
- 5.6 Dollar-duration-neutral butterfly
- 5.7 Fifty-fifty butterfly
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.