The current uptrend in Treasury yields will be cut short once the dollar appreciates in response to an increasingly hawkish Fed. Maintain benchmark duration and add a long 2/10 barbell, short 5yr bullet trade to profit from Fed…

Fed policymakers will soon shift their focus toward the strong employment and inflation data and stress that further rate hikes this year are likely. This will stem the rally in risk assets and cap the upside in long-dated yields.

Spread product performance has been foreshadowing changes in market rate hike expectations since early last year, and the recent bout of weakness means it is probably time for the Fed to temper its hawkishness.