Using Turnleaf Analytics inflation forecasts to trade bonds

In this paper, we use Turnleaf Analytics inflation forecasts as an input to trade US Treasuries and TIPS systematically. Our trading rule uses as an indicator, the gap between Turnleaf Analytics inflation forecasts and market expectations for inflation. Our trading rule for US Treasuries has risk adjusted returns of 1.17 and annualised returns of 7.5% over a historical sample since 2017, compared with risk adjusted returns -0.37 and annualised returns of -2.3% for a long only position in US Treasuries over the same period. For US TIPS our trading rule also significantly outperforms compared to a long only benchmark. We also show that our inflation based trading rule outperform trend following strategies, albeit to a lesser extent compared the long only benchmark.