Mish writes on the treasury bubble and why it might not burst soon. I agree with him - just because something gets beyond what we thought two months ago was reasonable doesn't mean it has to fall today. It can just exist for a long time.
Besides, shorting using TBT would be a bad idea - because of the structure of these ultrashort ETFs. They do double the daily returns - not annual returns. All these ultrashort ETFs are good only for day-trading, not for investing. I want to find a way of shorting treasuries where I am happy to hold the position for 5 years.
2 comments:
Agree with the basic thrust of the investment idea. The risk-reward favors shorts in treasuries. However, if the U.S. credit markets do not improve over the next 3-months, the economy would take another leg down. Then 10-year yields would adjust lower to say where 10-year JGBs are trading. But any signs of a recovery would lead to a major sell-off exacerbated through convexity hedging.
I think given the level of 10-year break-even inflation, further rally would be in real rates. But a sell-off will be in nominal rates.
I would short TLH and buy TIP.
This could be the biggest bubble in history just waiting to burst.
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