Current Positioning. All three Duration Capital strategies enter June flat at 0 years of futures exposure against maximums of +/-5Y (Conservative), +/-10Y (Moderate), and +/-20Y (Aggressive). The strategies came into May positioned short duration, carried over from the April NFP rebalance, and were closed on the May payrolls release date as the QuAD forecast shifted to a 0% allocation. The latest payrolls print, together with a Fed that has reiterated patience on further easing and core inflation that remains sticky in the high 2s, removed the conviction underpinning the prior short. With the 10Y now at 4.45% and real yields elevated, the model reads the valuation, macro, and technical signals as conflicting rather than directional, warranting a stand-aside posture into the next NFP cycle. We are watching the next payrolls and CPI prints, FOMC guidance around the terminal rate path, and any acceleration in coupon supply for the signals that would re-engage a directional position.

Alpha Generation. Alpha for May reflects the held-short window prior to the NFP rebalance rather than a full-month exposure, with the 10Y rising 5 bps on a close-to-close basis and the belly of the curve underperforming (2Y +10 bps, 5Y +11 bps). The Conservative strategy returned -0.09%, Moderate -0.19%, and Aggressive -0.38%, scaling broadly in line with the 1x/2x/4x notional framework. Returns were negative because the short was closed at the NFP print on a day the market rallied modestly, and the bulk of May's bear-flattening occurred after the rebalance when the strategies were already flat. The mid-month 12 bp sell-off on 15 May and the offsetting -10 bp rally on 20 May did not contribute, as positioning was zero through that window.

Key Catalysts. May was dominated by a hawkish repricing of the front end, with the 2Y selling off 10 bps and the 2s10s flattening 5 bps to +47 bps as the market pulled forward expectations of a slower easing path. The FOMC held rates unchanged and the post-meeting communications, reinforced by speeches from regional Fed presidents mid-month, leaned against the more dovish pricing that had built up in April. Core inflation data printed firmer than consensus, payrolls came in resilient enough to validate the Fed's patience, and the 15 May sell-off (+12 bps on the 10Y) coincided with the CPI release. Treasury supply remained a background pressure, with refunding auctions clearing at modest concessions, while the long end was comparatively well behaved (30Y +1 bp) as duration demand from liability-driven buyers absorbed the bulk of issuance. The net result was a curve that flattened in the belly, steepened modestly at the very front (3M/10Y +4 bps), and left directional conviction lower heading into June.