Wall Street Firms Double Down on Mid-Curve Treasuries Amid Fed Rate Cut

BlackRock and PGIM are reinforcing their positions in five-year Treasuries, a strategy that has delivered consistent returns throughout the year. The belly of the yield curve—bonds maturing in five to seven years—offers an optimal balance of carry and rate sensitivity, outperforming broader fixed-income markets with a 7% return year-to-date.

The Federal Reserve's first rate cut in nine months failed to disrupt this calculus. Chair Jerome Powell framed the MOVE as precautionary, emphasizing a data-dependent approach to future policy. Traders hoping for aggressive easing were disappointed, triggering a sell-off at the short end while mid-curve holdings remained stable.

"The belly is the sweet spot," said Russell Brownback of BlackRock, highlighting the segment's dual advantage of positive carry and price appreciation as bonds roll down the curve. PGIM's Greg Peters noted these instruments generate sufficient yield to cover leverage costs—a rare feat in today's yield environment.