hw0799

I'm not a fixed income manager, but my sense was that derivatives was for tactical adjustments to duration and using derivatives tended to have a lower overall transaction costs (plus you continue to accumulate coupon payments on the underlying stuff).

I forgot to mention in the post above (though dukatu2 mentioned it), that the advantage of swaps is that you can target them to a specific key rate, 2yr, 5yr, 7yr, etc, whereas treasury futures are tied to a 15 year T-bond (or is that a T-note?), and so isn't as helpful as a swap for targeting key rates (though it's fine for parallel shifts).