Yield Curve Investing : Optimizing Risk-Adjusted Returns

This paper investigates how recent changes in market interest rates have affected risk-adjusted returns. Returns are adjusted for duration, a measure of interest rate risk. Prior to the 2007-2008 rate decrease, one-year Treasuries offered the best risk/return tradeoff. As a result of the rate decrease, short rates dropped much more than longer rates, rendering the one-year Treasury less competitive. After 2008, the five and seven year Treasury maturities offer the best risk-adjusted returns