I am not sure I understand... What brutal interest rate risk? If I don't like the exposure to rates, I'll sell some 3y USTs at 77bps. However, at this particular juncture, I like interest rate risk. That's the whole point of the "duration grab" that's been happening recently. Whether that's right or wrong, sensible or stupid, I wouldn't want to be a judge of that. Let me just offer you a data point (and, again, I apologize for beating a dead horse), similarly-rated 3y JPY corps are trading at 34bps (from what I can tell, even though I am hardly a credit expert). How do you like 'em apples? So if you believe that we're all turning Japanese, you got some nice upside in buying that IBM 3y at 1%. EDIT: And let me add smth else... Depending on how much of IBM's income comes from overseas and how bearish you are on the state of US finances, it's not totally silly that being long 3y IBM vs short 3y UST at 23bps is a nice credit trade in and of itself. And I am mostly serious.
Sure. I mentioned the 10year because Bone (and Maverick?) are bullish to the horns. They are bragging about it, probably on the day of the top.
Use the OTR TY cash, or the CBOT TY futures contract. This forum is for speculators, and speculators buy on price appreciation - not coupon yield. Go renew your subscription to Institutional Investor if you want to go all wobbly now about coupon yield and beg off on total ignorance about price appreciation. There are some serious fixed income traders weighing in here with some valuable perspective which is getting dismissed far too easily by newbie pikers a bit too quick to chime in without the requisite knowledge base.
price is not a one way street--- speculators also sell to make money on price depreciation. It is called short selling, which I believe you know, but your above comment suggests that you do not deeply understand it even if you recognize it.
I'm not bragging about anything - I've been lucky with my positions, being long commodities and fixed income is a relative value play that is supposed to incur global capital re-allocation offsets. My point is that speculators trade on price appreciation - I've traded a ton of fixed income in my life, and I have always gotten paid on price. The only reason for a speculator to be interested in yield would be for calculating DV01's in my opinion. It's all about time horizon.
10-year futures at 126'04. I am going to try it on short side. I might even add if it goes to 08. Doubt the buyers will be that stupid, but who knows.
Trading Journals, now you're being silly and showing some real immaturity and basic lack of knowledge. You will not last very long in this business standing in front of a train, throwing up your arms, and declaring "you've gone far enough!!" I have seen so many people blow out in this business fading markets - it is a senseless endeavor, and entirely unnecessary to make money trading. What makes you think you're smarter than the collective market's baseline valuation of that markets worth? Wait for the market to break it's current trendline, let the market print a daily close below that trendline, and then short the market. You'll have some order flow behind you, then. Better yet, learn how to properly trade fixed income using relative value strategies. Then, you'll finally understand just a little bit about what the veteran fixed income traders here on this thread are speaking of.
why don't you guys run a contest with real-time calls (stops and profit targets preset but can be changed later but not after the fact)?
Because I don't manage OPM, and I have a client base including 6 funds and 30 individuals who would not be amused. I don't make calls for them, either.
Bone: You may be surprised, but I agree with you on being careful in shorting the top, because even when one is right it is not a good idea for a second reason: if the topping and the bottoming takes time, during that period of time the return will be lower even if one were to nail the top with little or no draw down. Nailing tops and bottom is however needed for fund managers because they need BOTH the time to get out (or get in), and a good price level. so nailing the top/bottom will allow them to maximum return and increase opportunities. And as a guy, I also like to pick tops when they look nice and good. I think you are a good guy Bone! Glad to meet you!