Shorting inflation-linked bonds with IB

Discussion in 'Retail Brokers' started by LeeD, Apr 14, 2010.

  1. LeeD


    I would like to short some US or UK inflation-linkled bonds with Interactive Brokers. Can I do it, and, if I can, what do I need to do in TWS? Thanks!
  2. Find the instrument in TWS and sell it. I got the impression most bonds were hard or impossible to borrow for shorting though. Might be easier to short TIP etf.
  3. LeeD


    I had an impression with "benchmark" government bonds borrowing was pretty straightforward...

    How do I find TIP ETFs?
  4. Should be this one, I think, although have no idea how to find it in IB:

    As long as you realize that by selling a TIPS you don't go short inflation, you go short real yields.
  5. LeeD


    Thanks! Any suggestions regarding how I could short inflation?
  6. You need to do what's called a "breakeven inflation" trade. If you want to sell breakeven inflation, you'd sell TIPS vs buying the closest maturity conventional bond (weights are determined in such a way as to make you net flat outright rates). Breakeven inflation or "bei" is the yield of the conventional bond minus the TIPS yield. I don't know how you could do this in IB.

    I guess you could try to do that using two ETFs, but you need to be careful that you're replicating the above as closely as possible.
  7. LeeD


    Thanks very much! I'll investigate and see what I can do via the platform.

    Aren't there any funds that track inflation outright?
  8. It would be a good idea, wouldn't it? Problem is that there's no incentive for anyone to create it and it's a pain in the arse, 'cause you have to be short bonds. So there isn't one, to my knowledge...
  9. BobG


    Unfortunately, IB has chosen not to offer the ability to trade any of the US inflation linked bonds through their platform.

    I don't really know what the problem is, since they apparently offer it for institutional customers.

    There are three ETFs that you can short to get the exposure you want: TIP, IPE, LTPZ. TIP is usually available to short.