20% CAGR Asset Class: Leveraged Treasury Notes

Discussion in 'Financial Futures' started by granville, Jul 20, 2010.

  1. I've been looking at treasury note futures as an additional asset class. The attached chart shows the 10 Year U.S. Treasury Notes Continuous Contract.

    My question is this: Can I use a portion of my account as margin to buy T-Note futures (about $1k/contract) and therefore be leveraged to increase the returns of this asset class to approach or even exceed the returns of most equity indices?

    If I compound the monthly returns shown, one could approach a 20% CAGR. If the answer is yes, why don't we hear more about this? Add this to an equity portfolio and you can diversify and increase returns.
  2. This idea reminds me of the computer models that mortgage underwriters had where lower housing prices did not compute. Some people on here might tell you that treasuries are the biggest bubble in sight. Your post implies that you think the US government can both borrow and mishandle their resources indefinitely.

    Look at Peter L. Bernstein's book "Capital Ideas Evolving" for a section on one of the Pimco funds that does something like your idea.
  3. Thanks Ficktrader,

    Indeed, notwithstanding the credit risk of the government, my question to the forum is about the mechanics of rolling treasury futures (of any government or duration). Is that chart accurate?

    And for what it's worth, there are years when you would have lost money on the strategy, but over the long term it seems to do well and is not correlated to stocks.

    What did Bernstein say in his book?
  4. What's your question? That we don't hear about the performance of USTs recently? I think you've been reading the wrong things, as there's been endless ink spilled on the subject, by everyone and their mother.
  5. Read "invisible hands" by Steven Drobny, it came out a few months ago. They interview one of the bigger hedge fund managers and he discusses investing in leveraged bonds to hedge your portfolio risks. He calls it something along the lines of a leveraged bond trade.