Short US Bonds? huh?

[slacker921]

I've been reading several places about people shorting US bonds, and I'm wondering how that's done.

It seems with Bernanke's recent statements that the Fed is going to (or is already) pumping into the bond market so it doesn't seem like it would pay off anytime soon.

 

[danberkeley]

I've been reading several places about people shorting US bonds, and I'm wondering how that's done.

It seems with Bernanke's recent statements that the Fed is going to (or is already) pumping into the bond market so it doesn't seem like it would pay off anytime soon.

maaaaaaaaaaaaaaaagic! ... try the TBT or shorting the TLT

 

[jack555]

id very much like to know the answer to this


could they be shorting the % returns expecting the tertun to be lower?

 

[sam9657]

id very much like to know the answer to this


could they be shorting the % returns expecting the tertun to be lower?

They are expecting the % return or yield to be higher thus the bond price lower. Yield and bond prices are inversely related.

 

[Smiley Gladhands]

I'm long TBT right now myself....it hasn't been working out too well.

And if Bernanke is going to be buying long-term bonds to push mortgage rates lower (as he has threatened to do) then TBT will continue to have a tough time. I agree that in the long-term rates should go up, but it's hard to make money in the current market based on what SHOULD happen, especially if you're trading against the government.

I wouldn't bet the house on TBT, and I would have a plan for taking profits if the trade goes in your favor.

IMO.

 

[danberkeley]

I'm long TBT right now myself....it hasn't been working out too well.

And if Bernanke is going to be buying long-term bonds to push mortgage rates lower (as he has threatened to do) then TBT will continue to have a tough time. I agree that in the long-term rates should go up, but it's hard to make money in the current market based on what SHOULD happen, especially if you're trading against the government.

I wouldn't bet the house on TBT, and I would have a plan for taking profits if the trade goes in your favor.

IMO.

The key is to stay solvent. Anyway, there are two things the TPTB can do: the correct thing or the wrong thing. The correct thing is to raise interest rates and end the protectionism and, therefore, save masses but ruin the wealthy elites. The wrong thing is keep rates low, continue the protectionism, and cause a collapse of the dollar and, therefore, ruin the masses but save the wealthy elite. My bet is that they do the wrong thing.

 

[slacker921]

Thanks much! .. this is one to tuck away for the near future. IMHO it's a bubble that will burst at some point - probably when our friend the Fed decides to stop inflating it - but that point might be next month or six months from now. Who knows.

 

[Smiley Gladhands]

The key is to stay solvent. Anyway, there are two things the TPTB can do: the correct thing or the wrong thing. The correct thing is to raise interest rates and end the protectionism and, therefore, save masses but ruin the wealthy elites. The wrong thing is keep rates low, continue the protectionism, and cause a collapse of the dollar and, therefore, ruin the masses but save the wealthy elite. My bet is that they do the wrong thing.

Yeah, I'm down on TBT because they've been doing the wrong thing, and unfortunately I don't see them suddenly changing their strategy. If rates increase too much then this whole mess is gonna get a lot worse very quickly. If people aren't buying houses at 5.5% mortgage rates, then they sure the hell won't be buying at 7%+. House values would continue to fall and more loans and banks would fail.

It seems like all of the new supply of treasuries would cause prices to fall (and rates to rise), but deleveraging is currently trumping any fear of oversupply of treasuries. Furthermore, if Bernanke interferes directly in the long bond as he has threatened then there's not much point in waiting for the 'market' to become efficient.

Thus, I'm getting closer to talking myself out of my long TBT position, though I'd like to at least see a small TBT rally before closing out.

My only consolation is that my other trades are doing worse (like FCX today).....wait...that's not really any consolation at all.

 

[Smiley Gladhands]

Is there an ETF that tracks short-term treasuries, similar to how TLT tracks long-term treasuries? That might be a decent bet, since short-term rates can't go much lower before suddenly you're paying the government to be able to fund the government, rather than getting paid for funding them.

TIA if anyone knows of one.

 

[slacker921]

Is there an ETF that tracks short-term treasuries, similar to how TLT tracks long-term treasuries? That might be a decent bet, since short-term rates can't go much lower before suddenly you're paying the government to be able to fund the government, rather than getting paid for funding them.

TIA if anyone knows of one.

.. it looks like PST shorts the 10yr if that helps. I'm leery of getting into these (TBT or PST) though, for the reasons mentioned earlier, but am reading on many other forums where the short masters (they shorted financials and real estate back in the spring and have been shorting oil this fall) are saying shorting bonds is the next big whale for them. They're looking at the massive amount of cash dumped in the bonds and saying it's a bubble waiting to pop. People will be exiting soon.

SRS seems to be another popular with them at the moment since the REITs have been inflated by bailout hopes and commercial real estate seems to be the next wave of the crash.

Who knows though. lol..

 

[nbruno322]

Wall St. got drunk off of cheap credit and easy money and it was the Federal Reserve who was pouring the alcohol by fixing interest rates artificially low.

http://www.smartmoney.com/Investing/Bonds/Could-Treasurys-Be-the-Next-Bubble&cid=1034/

 

[slacker921]

There was quite a discussion going on here about how the Chinese dropping the yuan might factor into the US bonds. There are people saying bonds will go up if China devalues the yuan, and people saying they'll go up. There are people saying this would cause inflation in the US, and people saying it would certainly lead to deflation. .. Who knows.

It's interesting that in the beginning of the thread everyone was certain it would cause the US to implode one way or the other. Friday came and went and there was some action but nothing catastrophic. Tonight the Asian markets are up 4 - 5.5% and Dow futures are up sharply.

 

[jacmicwag]

Well, in the old days when interest rates when down, bonds were a good investment. But, so much for the old days. My position in muni tax frees has been tanking for over a week. No idea why but I'm about to dump them.