Predicting US Treasury Returns at a glance
Predicting US Treasury Returns is a tactical asset allocation (TAA) strategy by Baltussen, Martens & Penninga across Treasuries, T-Bills, rebalanced monthly. Backtested 1994-11-30 to 2026-04-24 (31.3 years): 4.1% CAGR, 1.02 Sharpe, -10.4% max drawdown, 4.0% volatility.
- Type
- Tactical (TAA)
- Author
- Baltussen, Martens & Penninga
- Rebalancing
- Monthly
- Period
- 1994-11-30 to 2026-04-24
- CAGR
- 4.1%
- Sharpe
- 1.02
- Max Drawdown
- -10.4%
- Volatility
- 4.0%
Predicting US Treasury Returns — Tactical Asset Allocation Strategy
Predicting US Treasury Returns (Baltussen, Martens & Penninga, 2021) combines four signals into an ensemble model for bond timing: yield spread (IEF-BIL return proxy), bond trend (12-month IEF excess return), equity returns (inverted — low stocks = bullish for bonds), and commodity returns (inverted — low commodities = bullish for bonds). Each signal is z-scored over a 10-year rolling window and capped at [-1, +1]. The average signal maps to a continuous allocation between IEF and BIL.
Backtest Performance (1994-11-30 to 2026-04-24)
| Metric | Predicting US Treasury Returns |
|---|---|
| Compound Annual Growth Rate (CAGR) | 4.1% |
| Maximum Drawdown | -10.4% |
| Sharpe Ratio | 1.02 |
| Sortino Ratio | 1.29 |
| Annualized Volatility | 4.0% |
| Calmar Ratio | 0.39 |
| Total Return | 253.2% |
| Backtest Period | 31.3 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Variants
- 1
- Author
- Baltussen, Martens & Penninga
- Source
- Baltussen, G., Martens, M. & Penninga, O. (2021). Predicting Bond Returns: 70 Years of International Evidence. FAJ 77(3).
Asset Classes
- Treasuries
- T-Bills
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