No. of Recommendations: 2
"Return-free risk" is the problem, for sure.
I don't think this kind of approach is a reason to hold bonds in lieu of equities. I use an ultra-short bond fund as a "cash" reserve. Strictly speaking it's not really an "investment" at all.
But if I held bonds as a means of moderating the volatility of a diversified portfolio, as is common, I'd think carefully about something like this. I agree that the granularity of the backtest could be better (really miss GTR1); and the trades will introduce some friction, and throw off taxable gains. But even so, if you can beat an aggregate bond fund by 100 basis points, with no increase in risk, and it's 30 or 40 percent of your portfolio, that's not nothing.
So it seems to me, anyway.
Baltassar
