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Using SBA Floaters in a Barbell Strategy

With the Fed now in a holding pattern as they await additional data to determine the very direction of their next move, a barbell approach may be warranted. The long end of the barbell will be vital if the economy continues to weaken and yields move even lower. The short end of the barbell, on the other hand, would protect against a more resilient continued recovery or an increase in inflation expectations. Also, given the flatness in the current curve and the likelihood that this flatness will unwind relatively slowly, bonds indexed to the short end may provide a strong yield play over the next 18 to 24 months.

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