Duration Rotation in U.S. Treasury Fixed-Income ETFs: Evidence for a “Median” Strategy

We examine a simple duration-rotation strategy applied to six U.S. Treasury ETFs spanning the full maturity spectrum, using data from 2007 to 2025. At each semi-annual rebalancing date, ETFs are ranked by prior-period return and divided into three equal groups—Winners, Median, and Losers. Contrary to conventional momentum logic, the middle group consistently outperforms. The Median strategy grows USD 100 to USD 199.90 by end-2025, a CAGR of 3.79% against 2.17% for the passive benchmark, with a higher Sharpe ratio (0.606 vs. 0.494) and a shallower maximum drawdown (−11.6% vs. −14.4%). Newey–West HAC and Lo (2002) tests confirm statistical significance (p=0.031 and p=0.014), and an expanding-window walk-forward procedure yields p=0.0005 across 27 out-of-sample evaluations from 2012 to 2025. The result is robust to calendar alignment, evaluation endpoint, lookback window, and execution timing, and survives transaction costs by a wide margin. The strategy requires no interest rate forecasts, no proprietary data, and is implementable with standard ETF brokerage access.