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Anybody else short US 30 Bond
- Thread starter richard_m
- Start date
Quote from elisab:
Why are you saying that the price is meaningless?!? The real yield is almost null, but with this tool, the purchasing power is not eroded. I hope in a further fall to increase my position.
BUt opportunity to trade something else more profitable is eroded. Besides if inflation starts going down again these will lose money.
Because nobody who trades cash bonds, incl TIPS, uses prices. It's a meaningless number that conveys no information (one simple reason is the pull-to-par effect).Quote from elisab:
Why are you saying that the price is meaningless?!? The real yield is almost null, but with this tool, the purchasing power is not eroded. I hope in a further fall to increase my position.
As to purchasing power, of course it's eroded. If you buy TIPS outright, you're not long inflation. You're long real yield, which is a very different thing indeed.
Quote from Martinghoul:
Because nobody who trades cash bonds, incl TIPS, uses prices. It's a meaningless number that conveys no information (one simple reason is the pull-to-par effect).
As to purchasing power, of course it's eroded. If you buy TIPS outright, you're not long inflation. You're long real yield, which is a very different thing indeed.
Iâm sorry, but I do not understand. When you buy a bond below 100, you get a sure capital gain on redemption. Then the bond revalues itself each year at the rate of inflation: isnât it a great protection of purchasing power?
Not exactly, because your sure capital gains on redemption have to be discounted. Moreover, a TIPS doesn't really "revalue itself". It just pays you a coupon calculated using a notional that is multiplied by a measure of how much inflation has been accrued (index ratio).Quote from elisab:
Iâm sorry, but I do not understand. When you buy a bond below 100, you get a sure capital gain on redemption. Then the bond revalues itself each year at the rate of inflation: isnât it a great protection of purchasing power?
The point is that a TIPS trading at a price of X already implies a certain average annual inflation rate over the life of the bond. if the actual inflation you end up experiencing is lower than what was implied when you bought the bond, you will lose money (incl opportunity cost).
too early, I am selling ZT/ZF. 2/5 yrs note rate is rediculously low, just 0.37%, 0.67%.
will keep eye on ZB(seems not good for short), will buy when it hits 4.3%+ ~4.8%.
normally the market will overract, so it is safe to short, the rate may finally print 5%,6%, even 7%,8%.market is blind,always make wrong bet.
will keep eye on ZB(seems not good for short), will buy when it hits 4.3%+ ~4.8%.
normally the market will overract, so it is safe to short, the rate may finally print 5%,6%, even 7%,8%.market is blind,always make wrong bet.
Quote from elisab:
Strong sells of bond but the 30years yields are close to 4%....is it a great chance for the contrarians?