It is now time to sell sell sell your TLT - Bonds are going to crash

I share your pain. For those who short long bond, let us share our thoughts and discuss the next move.

I am holding a large short postion on long bond (ZB). It is my fault that I did not listen to sevearl signals that economy is worsening. I have been worried that it is too late to cover my short position. But ZB keeps moving up and might move up more.

1) Looking at ^TYX and ^TTNX charts, bond price could stay high for several month before droping. But eventually the bond prices will drop, unless there is double dip and US become Japan. Is the economy situation now worse than March 2009? Will GDP be negative for next several quarters or years? Will sp500 earning dropping to March 2009 level?

2) Fed will keep buying long bond for sometime until there is sign economy improve....

Anyway This article speakes better than I do:
http://www.thestreet.com/story/10840585/3/bond-short-plays.html

Q:
How can I keep this large short positions and wait until bond price to fall without being wiped out first?

I do not want to replace my short positions with long put option becasue I do not know how long it will be and put premium is expensive.

I plan to:
1) short long-dated TLT deep call
2) short long dated TBT deep put

Is there any problem with the above approach?

Is there any better way?
 
Quote from stevenw:

I share your pain. For those who short long bond, let us share our thoughts and discuss the next move.

I am holding a large short postion on long bond (ZB). It is my fault that I did not listen to sevearl signals that economy is worsening. I have been worried that it is too late to cover my short position. But ZB keeps moving up and might move up more.

1) Looking at ^TYX and ^TTNX charts, bond price could stay high for several month before droping. But eventually the bond prices will drop, unless there is double dip and US become Japan. Is the economy situation now worse than March 2009? Will GDP be negative for next several quarters or years? Will sp500 earning dropping to March 2009 level?

2) Fed will keep buying long bond for sometime until there is sign economy improve....

Anyway This article speakes better than I do:
http://www.thestreet.com/story/10840585/3/bond-short-plays.html

Q:
How can I keep this large short positions and wait until bond price to fall without being wiped out first?

I do not want to replace my short positions with long put option becasue I do not know how long it will be and put premium is expensive.

I plan to:
1) short long-dated TLT deep call
2) short long dated TBT deep put

Is there any problem with the above approach?

Is there any better way?
More...

I'm not an expert by any means, but it seems to me that the bond prices are moving, not because of fundamentals, but because of momentum. Even in 2008, it didn't have this type of strength, and pure fear doesn't seem to explain the ferocity of this movement. When people are scared, they move their money into short-term t-bills, not notes or bonds.

This looks like the run up of gold or oil, where the "hot money" is rotating from sector to sector to sector. To me, this looks like how stocks like VMW or NFLX have been behaving this year, or the entire market last year.

This time, the hot money decided on treasuries. I have no clue whether or not it can continue higher, or if it will turn back down the next day, but as the old adage goes, the market can remain irrational for a lot longer than I can remain solvent. The added fact that the Fed has said they will be buying medium term treasuries just added fuel to the fire. I don't believe that the Fed has bought any long-term treasuries, so the fact this is joining the party just means that the entire yield curve is being bought.

Since I believe this is momentum rather than fundamentals-based, I think the only thing I can do is wait for real signals that it is going down before trying to get into the short trade. I think trying to call a top right now is really dangerous, and I already got burned and just like I got destroyed all throughout 2009 trying to call the top of the market.

Stevenw, have you thought about just cutting your position and then reentering when the momentum is going back down? You don't need to catch the move from the very top in order to make a profit. Staying in the trade and trying to manage the position with options seems awfully expensive...
 
How long and how far can an expensive but trending market keep going? A pretty long time. Unless you have some kind of timing factor to make you think the end is nigh, usually it doesn't pay to fade the trend. Best to fade it at violent extremes when the price has spiked significantly and sentiment is frenzied. Are we at that point in Treasuries? IMO not yet. That said, I have reduced my positions significantly because the valuations have got a lot worse.
 
You shorts have got to start using your heads. This bond/t-note market is just like the stock market of 2007. Man, I was shorting it, and it just kept going up, and up, and up...all summer of 2007. My win rate was 20%....pathetic at best.
Finally, after I lost a TON, the market REVERSED....and wow, what a reversal.
We may or may not see the same situation in the interest rate market.
 
In 1990, when interest rates peaked at around 8%, few people in Japan thought interest rates would be going to 1% and staying there for 20 years and possibly more.

There is nothing preventing the same from happening in the US. Where will ZB be trading then.
 
Still long.

There have been many times when the drop in yield has equaled or exceeded this one, over the same time frame. See a chart of TYX. Yes, it is low historically, but this fall has not been particularly precipitous.

Agree that it will end badly. But there is no telling when.
 
Quote from deadbroke:

LONG position STOP is now moved up again to under the August 17 bar @ 103.88
More...


LONG position STOP is moved up again to under the August 23 bar @ 105.2 = more profit locked in.
 
Quote from deadbroke:

--------------------------------------



current yield = 2.58

my target call = 2.554

jeez, we are so close to that, just a hair ....... :) :D
More...


see the prev. 10-yr yield chart a few posts up for reference.

Yesterday my CALL target was exceeded. The only viable target I have left is the 78.6% retracement level and we are just a hair above that.





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I still think the TLT is a short. The problem with bubbles is that you oftentimes know that you are in a bubble, but have no idea when it will end. I knew that technology was in a bubble in 1998 and housing in 2004...I just had no idea when it would end or exactly how far it would go up.

Right now the TLT is off about 5 points or 5-6% from its high. I believe in time I will be redeemed on this call and I would put the target at Aprils low of around 86...
 
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