Trade of a lifetime- Shorting treasury bonds

Discussion in 'Fixed Income' started by Jad930, Apr 25, 2021.

  1. Jad930

    Jad930

    Does anyone see shorting the 10yr and 30yr treasury bond futures as a long term trade with little price risk?
    If inflation returns and stimulus ends what’s to keep bond prices from falling other that a flight to safety trade when and if equities take a bath? The correction began last fall and the recent bounce seems attributed to short covering and the feds willingness to “stay the course” with holding overnight rates low and temporary stimulus. When rates normalize from inevitable inflation or lack of stimulus, wouldn’t the next 20-30 points lower be low fruit for the treasury shorts?
     
    shuraver likes this.
  2. orbit23

    orbit23

    "If inflation returns and stimulus ends what’s to keep bond prices from falling other that a flight to safety trade when and if equities take a bath? The correction began last fall and the recent bounce seems attributed to short covering and the feds willingness to “stay the course” with holding overnight rates low and temporary stimulus. When rates normalize from inevitable inflation or lack of stimulus, wouldn’t the next 20-30 points lower be low fruit for the treasury shorts?"
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    I don't even know what a treasury bond is or what it does but just by looking at the chart, it looks like a SUPERB long. You don't want to short this imo.
    Why would anybody want to go and lose money? Long treasury bonds instead, make money that way.
     
  3. Overnight

    Overnight

    When yields go up, price goes down. When yields go up, it tends to lead to a decline in equity prices, as folks chase yields.

    Complicated relationship. But pay it no mind. The ZB is $31.25 per tick. Trade it at your own peril.
     
    Apologetik likes this.
  4. SteveM

    SteveM

    My mind says "yes", but then I look a long-term chart of Japanese government bonds and my heart says "no".
     
    yc47ib and jys78 like this.
  5. orbit23

    orbit23

    The way i see it tbonds are inversely correlated with stonk market. They went up in march20 when stonks crashed.
    They look like a long now IDK. Mkt could crash soon then
     
  6. Handle123

    Handle123

    I am long term short from 182's, think right now have some type of rally so as to be able to short more.
     
  7. kmiklas

    kmiklas

    You need to understand two HUGE drivers of demand for these instruments:

    1. 120B/month from The Fed and Uncle Jerome. As long as this "artificial" demand continues, prices remain flat or bullish.

    2. China. They reinvest US dollars into T Bonds. Massive demand.

    I don't see either of these demands tapering until 2022 at the earliest.

    So, imnsho, get long, my friend!

    (Just don't talk about inflation)
     
    yc47ib, TH Anlaysis and jys78 like this.
  8. maxinger

    maxinger

    Trade of a lifetime- Shorting treasury bonds
    ----->
    Trade of a lifetime- Shorted treasury bonds on Aug 20.
     
  9. Fain

    Fain

    Just go long financial stocks or anything else that will increase when rates rise.
     
    shuraver likes this.

  10. Wow, I hadn't really thought of that. Is it true that when interest rates go up the finance companies almost necessarily make more money? I would guess so, because their spread can get bigger and still stay the same as a percentage basis. Need more JPM.
     
    #10     Apr 26, 2021