I thought that if this was a matter of interest it would be better to start a new thread.

After FlyingCircus mentioned the use of Dual Momentum for Fixed Income I spent some more time looking at it. My goal was decent, steady returns without too much trading.

I settled on just three asset classes (High Yield, Mortgage-backed, and Intermediate treasuries), with ultra-short bonds for the out-of-market asset. There is no absolute momentum asset. Look-back period is 4 months, traded monthly on the next close.

I tried this with ETFs (JNK,MBB,IEI,BIL), and with mutual funds in the same categories:

JNK = BUFHX
MBB = PTRIX
IEI = FSTGX
BIL = PTSHX

Using mutual funds allows the method to be tested back to January, 1998. From Jan 1998 until June 2023 it produced a CAGR of 6.87%, Sharpe 1.16 Sortino 2.48 MDD -5.12. 80 trades in 25 years. ETFs can be tested back to 2009, and produce similar result, as does weekly trading, which adds more churn for pretty much the same payoff, but offers evidence that there's nothing special about month-end trades.

Baltassar

Mechanical Investing FAQ

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