agreed. but the market is moving in expectation that the fed will pump unlimited money to meet some sort of target long term mortgage rate. until that is done and played out...
Agreed! But careful shorting this though. The market can stay irrational longer than you can stay solvent. Don't stand in the front of the train.
Well, from a contrarian point of view, when people start talking about ZB at 200 at this point, it's time to start scaling into a short position. Reminds me exactly of the oil trade, when it hit $140 and people started coming out asking when (not if) it would hit $200. Could be more upside on ZB, who knows. But when this thing turns around, between the sellers running for the door at the same time and the shorts piling on, I expect the reversal to be as vicious as the one we've seen in oil.
What's the best way to play this? Shorting futures is likely to get you killed. So ... what are the most attractive options to buy?
With the fed intervening aggressively, I think it's prudent to be careful, if you want to fight the fed.
There are plenty of ZB puts you could get into. Or if you want to play it in stock form, just short (or buy puts on) TLT, or buy TBT.
With what little I know about ZB, I calculate the theoretical maximum price as 190 (price at 6% coupon, 0% yield, 15 years to maturity). At a yield of 1.6% (the current yield of Japanese long-term bonds), ZB price would be 158'150. While there is still plenty of room from the current 142 to 158 (or 190) for the upward trend to finish its course -- in my opinion the 2$T issuance of treasuries in 2009 and a severe reduction in foreign easy-oil-money to buy them should start depressing prices at some point soon. (I started learning about interest rate futures very recently and will admit to not understanding the dynamics that drive prices that well. Pointers to comprehensive data / analysis / commentary websites would be appreciated).
dareminator, ZB is the 30-year treasury bond. The theoretical maximum is a lot more than you proposed. I got around 280.