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U.S. Treasuries and macro-enhanced trend following

Trend-following strategies rely on the persistence of market trends. Such persistence can arise from the gradual dissemination of information or behavioural biases. In light of these inefficiencies, trends that coincide with supporting economic information (macro tailwinds) are more likely to persist than those accompanied by opposing macro information (macro headwinds). As a result, a macro-enhancement of standard trend-following signals should produce better investment returns.
This post supports this proposition for the U.S. Treasury market over the past 32 years. It tests simple macro enhancement types for directional return trends and curve-flattening return trends. In all cases, macro enhancement would have materially improved predictive power and backtested trading profit […]