Can you short a bond?

D

dnaj65000

I apologize for the newbie question because I have never traded a bond in my life.

I know that bond prices rise when interest rates fall. If you bought a bond 3 yrs ago, you would have a good unrealized capital gain today.

My question is, can you do this in reverse? Is it possible to short a bond so that you make money when interest rates rise? I'm thinking 10yr time frame.

Or is there a more efficient way to play interest rates thru futures with that long of a time frame?

Thanks
 
Quote from dnaj65000:

I apologize for the newbie question because I have never traded a bond in my life.

I know that bond prices rise when interest rates fall. If you bought a bond 3 yrs ago, you would have a good unrealized capital gain today.

My question is, can you do this in reverse? Is it possible to short a bond so that you make money when interest rates rise? I'm thinking 10yr time frame.

Or is there a more efficient way to play interest rates thru futures with that long of a time frame?

Thanks
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Neither note nor bond futures have liquid back months. It's necessary to roll your position every 3-6 months. Also, because of the steep yield curve, note/bond futures trade at significant negative carry. That means a future's short has to "pay" the market the diff between the repo rate and the implied yield. That can get expensive. Your best bet is to buy RRPIX. It's a fund called Rising Rates Opportunity. RRPIX's price trades in tandem with bond yields and inversely to bond prices. In other words the fund bets on rising rates. It has virtually 100% correlation in movement to the long bond but trades at a slightly higher beta than bonds on a dollar basis.
 
Easiest way is to open a futures account and short a 10yr-note future, one of the most liquid markets in the world, you'll just have to rollover every 3 months if you intend to hold for the long term.
 
If you want to play rising rates there are two good ways:

1. Open a futures account and short bond futures

2. Buy the mutual fund RRPIX (rising rates opportunity fund) -- that is probably the easiest way. It is basically 1.25 X the ten year yield index (Symbol: TNX)
 
Buy the iShares Lehman 20+ Year Treasury Bond Fund (Exchange Traded Fund) - its symbol is TLT.

TLT will rise and fall with the yield of long duration bonds.

nitro
 
The Rydex Funds JUNO Fund, symbol RYJUX, is a inverse mutual fund of the 30 yr US Treasury. I have my eye on the fund for when I think the time is right. I trade with Rydex Funds and have been very happy with the results.
 
:)

Quote from nitro:

Buy the iShares Lehman 20+ Year Treasury Bond Fund (Exchange Traded Fund) - its symbol is TLT.

TLT will rise and fall with the yield of long duration bonds.

nitro
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