Construct a positioning strategy from forward rates when the manager expects the curve's level, slope or shape to differ from market pricing
The idea
A view is only active relative to forwards: expecting rates to rise is a bet only if the rise exceeds what forward rates already imply. For level, shorten duration below the benchmark if rates are expected to rise by more than forwards imply, and lengthen if they will rise less or fall. For slope, a steepening view calls for a duration-neutral steepener, long short maturities and short long maturities; flattening is the reverse. For shape, expecting intermediate yields to fall relative to the short and long ends favours a bullet; the opposite favours a barbell, often built as a duration-neutral butterfly. The trap is taking an accidental duration bet while trading slope; match money duration across the legs.
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