Current Positioning. Duration Capital enters May with short duration exposure across all three overlay strategies, positioned at approximately 87% of maximum capacity: the Conservative strategy holds −4.35 years against a ±5-year mandate, the Moderate strategy −8.7 years against ±10 years, and the Aggressive strategy −17.4 years against ±20 years. The directional view reflects a conviction that US Treasury yields face further upward pressure, underpinned by a Federal Reserve that held the funds rate unchanged at 3.50–3.75% at its April 29th meeting and signalled no near-term inclination to ease. A reacceleration in energy-driven inflation — headline CPI rose 3.3% year-on-year in March as oil surged on the Strait of Hormuz disruption — and a labour market that remains resilient with unemployment at 4.3% leave the Fed with limited room to pivot dovish. Against this backdrop, Duration Capital continues to position for a structurally higher yield environment.

Alpha Generation. April was a constructive month for the overlay strategies, with all three generating positive alpha as Treasury yields moved broadly higher. The 10-year yield rose 10 basis points over the month to close at 4.40%, providing the primary driver of overlay returns: the Conservative strategy returned +0.30%, the Moderate strategy +0.60%, and the Aggressive strategy +1.19%. The near-linear scaling across mandates reflects a coherent short-duration expression, with the Aggressive strategy delivering roughly four times the alpha of Conservative at approximately 3.7 times the notional exposure. Front-end yields were largely anchored — the 3-month bill fell 2 basis points — confirming that the move was concentrated in the belly and long end where the strategies carry their exposure.

Key Catalysts. The dominant theme in April was the interaction between the Strait of Hormuz crisis and US monetary policy. Iran's disruption to shipping through the strait — which had been partially blocked since late February following the US-Israel air campaign — drove oil prices sharply higher, with WTI breaching $89 per barrel, and pushed March CPI significantly above consensus, effectively taking Fed easing off the table for the near term. The 10-year yield oscillated through several notable daily moves, including a sharp −6 basis point rally on April 17th as Iran signalled a temporary reopening of the strait, before resuming its sell-off into month-end as risk sentiment stabilised and the IMF warned of global recession risk; yields closed the month +6 basis points on April 29th, the day of the FOMC decision. The FOMC itself held rates steady in an 8-4 vote — the widest dissent since 1992 — with Chair Powell citing elevated inflation uncertainty and geopolitical risk, adding further credibility to the market's repricing toward one cut or fewer through year-end. Treasury supply continued to weigh on the long end, with the 30-year closing at 4.98%, and the 3-month/10-year spread widened 12 basis points to +72 basis points as the curve steepened from the front end outward.