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FWIW -
According to the Federal Reserve H-15 Indexes of Annual Total Return -
Year-Bill almost always out produces 3 & 6-Month Bills
Two-Year Treasury almost always out produces the Year-Bill
Add transaction costs and extending makes even more sense.
Even when the yield curve inverts (3-Month yield higher than 6-Month, and
so-on), most fixed-income guys will extend thinking rates will fall.
This is getting a little off topic but ,I looked at this once and to my
surprise -
Over the last 16 years, the annual total return of the Two-Year Treasury out
produced the 30-Year something like 70% of the time. Interestingly, the
average holding period of the 30-Year Treasury was 12 days, making it more
of a trading instrument than investment. From an Investment Point of View,
the Two-Year Treasury is hard to beat on both sides of the curve.
-David
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