What is your short term 30 year Treasury rate expectation?

Discussion in 'Financial Futures' started by Error Correction Funder, Apr 2, 2018.

  1. Judging by how the Treasury market responds to 20%+ stock crashes, the 30 year should hit 2%, and the 2 10 spread should invert strongly.

    What say you?
     
  2. How can you trade this without buying in directly? Any optionality?
     
  3. I'd be shocked to find that there are no options on futures on rates. There's just about any combination of energy spread available that almost never trade yet are still listed, so that kind of listing for Treasuries would be a shock if they didn't exist.

    Long term Treasury ETFs seem to have options on them. MOVE was dirt cheap, last I saw, so double the pleasure.
     
  4. Yes, there are options, of course... Both ZB and the ultra long bond have decent options liquidity. There are also options on the common ETFs.
     
  5. kj5159

    kj5159

    Marty, where do you think long bonds are going? Curious to hear from someone in the trenches.
     
  6. I can’t possibly imagine wanting to own them, but I am often wrong...

    Does that answer your question?
     
  7. kj5159

    kj5159

    That's basically my thoughts too, though I too am often wrong :D. Also I'm not a bond or rates trader so my opinion is probably worth less than zero.

    With the yield curve where it is, all else being the same I'd think the 5-7 year range just looking at the small yield difference for going further out in maturity + hopefully some roll down.

    Increasing federal deficit + rising short term rates + Fed unwinding balance sheet + improving economy= higher long term rates?

    Is there enough demand to soak up that much supply? This could probably be studied relatively easily.

    Further, is there enough demand to soak up that much supply, within a short enough time frame to make the (possible) returns of shorting duration meaningful? This being a function of the first could probably be studied also.

    European rates and GDP growth probably has a lot more to do with our long bond rates than can be quantified I would think, if a 10 year Bund is yielding sub 1% then the US 10 year probably looks quite attractive, same with the 30 I'd think. Improving EU economy = stronger euro = more incentive for them to be long EUR/USD in concept and buy US bonds in euros which would increase demand further than usual in combination with their having very low rates increases demand further.... Will this competitive aspect then serve to lift European yields also or will it not matter so long as the ECB is still buying?

    Both sides have good arguments, this is why I have no idea. Haven't run any numbers on any of this though so the clues are likely in there.

    I feel inclined to write these all on a white board and assign weights to each factor to figure out an inkling.
     
  8. It's a tuff one, for sure... As you said, lots of factors to consider and weigh.