The recent spike in yields is an opportunity to add duration, argues Paul Krake from View from the Peak. He says that with cash rates anchored and the structural headwinds facing the yield curve unaltering, the risk versus reward of owning US 10 year bonds is remarkably compelling, especially when done so in the context of a long equity portfolio. While yields can grind higher as the SPX finishes the year above 3100, the attractiveness of long duration fixed income will only grow if the Fed continues with its asymmetric framework. The investment case being put forward here by VFTP rests on the view that the structural flattening of the yield curve that we’ve seen over the past five years, will not go into reverse, and while the spread between two-year bonds and ten-year bonds has widened some 30bps from the inversion of mid-August, it is difficult to argue that this is anything more than a correction from an extreme situation that marked the lows of the August equity sell-off. For VFTP, this is nothing more than a market gyration against the prevailing structural headwinds of demographics and disinflation.