Profiting from New tax plan

sle said:
It's obviously conditional on the overall state of economy - if we are in a boring market, the bonds will eventually sell-off. In a flight to quality, all bets are off. That's why if I were doing this trade, I'd do it either by buying puts outright or doing a conditional steepener.
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So record VIX sub 10 closes has not been a boring market? :)

I guess this leads to another old saying, "if you apply enough leverage, no market is boring.
 
Maverick74 said:
So record VIX sub 10 closes has not been a boring market? :)
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Well, all things considered we have seen a few interesting events along the way :)

PS. This particular year has been a nightmare. If not for some good dispersion results, I'd be looking for a new job.
 
sle said:
Well, all things considered we have seen a few interesting events along the way :)

PS. This particular year has been a nightmare. If not for some good dispersion results, I'd be looking for a new job.
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Yeah, I second that... And one of the things that didn't work bigly was short bonds. And the expression just didn't matter.
 
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sle said:
Well, they must also think SPX < 1600 by that time :)

Doing it as a conditional steepener is a nice way to express that view - if we 10s do rally back to under 2%, the trade just goes away
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not quite 1600, but high in first half with narrowing of market, pulling back after that.
 
Martinghoul said:
Yeah, I second that... And one of the things that didn't work bigly was short bonds. And the expression just didn't matter.
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Yes, the short bond trade had everything line up that was supposed to be the catalyst. Strong econ numbers, strong equities, and now the tax cut...but it just did not happen.

I don't know, lower rates overseas attracting the bond bid here ?
 
sss12 said:
Yes, the short bond trade had everything line up that was supposed to be the catalyst. Strong econ numbers, strong equities, and now the tax cut...but it just did not happen.

I don't know, lower rates overseas attracting the bond bid here ?
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Possibly... Alternatively, it could be some bid from the pension fund community. Who knows.
 
sss12 said:
Yes, the short bond trade had everything line up that was supposed to be the catalyst. Strong econ numbers, strong equities, and now the tax cut...but it just did not happen.

I don't know, lower rates overseas attracting the bond bid here ?
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Not exactly. Foreign buyers got killed on their dollar exposure this year. That "extra" yield cost them big time if they didn't hedge their currency risk. A common explanation is that large trade deficits, specifically to China, causes those countries to build up dollar reserves which in turn get used to buy our treasuries. One of the benefits to running large trade deficits is foreign countries become defacto lenders to the US driving rates down. It's not all benefit though, your exposing your currency to devaluation.
 
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