I'm running some backtesting on TLT ETF prices and am quite puzzled by the asymmetrical behaviour than the bond prices decrease or increase. Specifically, the trend following strategies seem to be working consistently better while shorting TLT but the mean reversion strategies when going long on TLT. Also, the time frame from the successful shorting strategies is much less than that of the long strategies. I can understand the asymmetrical behavior in stock prices but don't have any insight into why this is happening in TLT as it should be more dependent on Fed rate increases. I searched for possible answers or at least an insight into bond pricing but could not find much - any help is appreciated Thank you
Why for? What the FED did 10 years ago, was shift the entire risk spectrum towards "risk" and towards equities -- including the denigrated debt market/TLT/quality paper. It has only recently (past 15-18 months??) *started* to make a dent in selling off it's ballooned balance sheet -- so no matter the course of rates, the shift in (low-)risk assets will likely be maintained for the coming decade. All of which goes to say: there is and will be, a material link across the risk spectrum, regardless of (debt or equity) instrument. What produces your results, w.r.t. longs, shorts//profit, loss//hold-periods? For my own work, when I see a relative correspondence between market cycles/periodicity and the trade-trigger parameters of my programs, the expected gains pop. (And so now, the new direction is a second layer of rules, towards an ongoing evaluation of the trade triggers. Yipes!) Hope that helps...