Hedge funds adjust macro strategies by increasing exposure to investment-grade bond funds, reflecting conviction in the defensive positioning of fixed income assets. Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at. “The 10-year [yield] will fall or stay anchored if there is concern over soft data or recession risk,” says Knotts. “The jump in [unemployment] claims and slowing growth would tend to pull long yields down or keep them range-bound if the Fed opens the door to additional cuts.” Strong demand in the secondary bond market supports NAV growth in popular ETFs, affirming the attractiveness of investing in bond funds during uncertain equity earnings seasons.
