I've been watching bonds from the sidelines to get an idea of how they act before I start trading them... I'm curious as to the reason for the move up on Friday. Does anyone have any ideas?
Selling S&P's and buying bonds seems to me to a good strategy right now... with at least half of holdings.
The Bonds have been trading in a very STUPID mode for the last several weeks. I have been trading them for some time and they are not making any sense in any way lately. I would advise staying away from them for a month or two until they get back to some normality.
Here is my version of Bonds on Friday http://www.elitetrader.com/vb/showthread.php?s=&threadid=28736&perpage=6&pagenumber=8
didn't really support a bond rally. Plus bonds are at the top of a trading range, so asset allocation into them doesn't make a lot of sense to me either. This is why I'm just watching and not trading yet.
As long as hedge funds and banks can borrow at 1% and buy bonds yielding 5% it will be hard to get a meaningful break in bond prices. For traders who don't see an uptick in short rates coming soon, the allure of picking up 400 basis points a year in carry is considerable. The profits are even more for funds that sell option premium against portfolio.
colewave..... A lot of the movement in bonds (outside of economic releases) has to do with the movement in currencies, specifically the Yen. The reason for this is that every time the yen falls against the dollar the Japanese central bank steps in and buys dollars and then they buy bonds with these dollars.... The past few days the yen has been hitting short term highs and people are selling because they are anticipating the fact that the Japanese will not be buying as much or at all
I think you have it backwards. When the yen goes up against the dollars, the BoJ steps in and sells yen/buys dollars. They then purchase treasuries with the dollars they have acquired.