Shorting Treasury Bonds
- Thread starter kmiklas
- Start date
probably tlt bought lot of that.
I have no position in TLT right now. I missed the short. I don't see the trade on either side of TLT here. This part of the curve is fools gold.
why wouldn't use real money, jsut don't leverage too much for the margin calls.
https://www.unseenopp.com/wall-street-says-buy-treasurys/
(The Daily Upside)
PERSONAL FINANCE
‘Higher-for-Longer’ is Wreaking Havoc on Traditional Investing
They were more guidelines than rules anyway.
As the world settles into a higher-for-longer interest rate environment — featuring slowly-but-surely falling inflation in the US, at least — one thing is painfully clear for everyday investors saving for retirement: the typical investment strategy of a 60% stocks/40% bonds portfolio is proving unusually fruitless. In fact, 2022 marked the worst year for the strategy since 1937, according to a Wall Street Journal analysis published Thursday — and 2023 hasn’t been much kinder.
In Lockstep
The 60/40 ratio has had staying power for a reason. In a normal economic environment — i.e. the relatively low-interest rates and low inflation we’ve had for the past few decades — the 60/40 strategy offered high upside on stocks in good years for equities, with a healthy hedge in bonds when stocks underperformed. The logic is simple: Stocks fall when the economy slumps, and when the economy slumps, bonds tend to rise as investors turn to relatively safe fixed debt coupons. And when policymakers lower interest rates to promote growth and activity, the price of long-dated bonds tends to rise. Overall, the strategy tends to yield 5% to 6% returns annually.
But now the economy is upside-down. Interest rates and inflation are both high, and the Fed isn’t likely to dramatically lower interest rates because the economy continues to hold up. Higher rates crunch bond prices and lift yields, so stocks and bonds have been moving in tandem — which means last year’s market rout crushed the good ol’ 60/40:
• Last year, when the S&P 500 fell nearly 20% and the Nasdaq fell 33%, bonds didn’t come close to offsetting the fallout, and 60/40 portfolios lost an average of 17%, according to Leuthold Group analysis.
• This year has been slightly different, given the S&P 500’s 14% gain. That’s helped 60/40 portfolios recover some 6% so far — but stocks and bonds continue to move in tandem more than any point since 1997, according to Standpoint Asset Management analysis, meaning there’s been little if any bond hedge amid the S&P’s 6% fall since July.
Higher… But For How Long? Everyone is learning to live with elevated interest rates on the fly. On the flip side, high levels of government spending means a surge in the supply of new Treasury bonds — at a rate that might have Wall Street struggling to adjust. Meanwhile, big banks are limited in bond purchases due to increased regulation, and Japan, the largest foreign creditor, is holding its lowest levels of US bonds since 2019. That has some thinking the 60/40 strategy was the right strategy for a time we’re no longer living in. “That was Goldilocks. It wasn’t normal, it was an anomaly,” Eric Crittenden, the chief investment officer of management firm Standpoint, told the WSJ.
- Brian Boyle
PERSONAL FINANCE
‘Higher-for-Longer’ is Wreaking Havoc on Traditional Investing
They were more guidelines than rules anyway.
As the world settles into a higher-for-longer interest rate environment — featuring slowly-but-surely falling inflation in the US, at least — one thing is painfully clear for everyday investors saving for retirement: the typical investment strategy of a 60% stocks/40% bonds portfolio is proving unusually fruitless. In fact, 2022 marked the worst year for the strategy since 1937, according to a Wall Street Journal analysis published Thursday — and 2023 hasn’t been much kinder.
In Lockstep
The 60/40 ratio has had staying power for a reason. In a normal economic environment — i.e. the relatively low-interest rates and low inflation we’ve had for the past few decades — the 60/40 strategy offered high upside on stocks in good years for equities, with a healthy hedge in bonds when stocks underperformed. The logic is simple: Stocks fall when the economy slumps, and when the economy slumps, bonds tend to rise as investors turn to relatively safe fixed debt coupons. And when policymakers lower interest rates to promote growth and activity, the price of long-dated bonds tends to rise. Overall, the strategy tends to yield 5% to 6% returns annually.
But now the economy is upside-down. Interest rates and inflation are both high, and the Fed isn’t likely to dramatically lower interest rates because the economy continues to hold up. Higher rates crunch bond prices and lift yields, so stocks and bonds have been moving in tandem — which means last year’s market rout crushed the good ol’ 60/40:
• Last year, when the S&P 500 fell nearly 20% and the Nasdaq fell 33%, bonds didn’t come close to offsetting the fallout, and 60/40 portfolios lost an average of 17%, according to Leuthold Group analysis.
• This year has been slightly different, given the S&P 500’s 14% gain. That’s helped 60/40 portfolios recover some 6% so far — but stocks and bonds continue to move in tandem more than any point since 1997, according to Standpoint Asset Management analysis, meaning there’s been little if any bond hedge amid the S&P’s 6% fall since July.
Higher… But For How Long? Everyone is learning to live with elevated interest rates on the fly. On the flip side, high levels of government spending means a surge in the supply of new Treasury bonds — at a rate that might have Wall Street struggling to adjust. Meanwhile, big banks are limited in bond purchases due to increased regulation, and Japan, the largest foreign creditor, is holding its lowest levels of US bonds since 2019. That has some thinking the 60/40 strategy was the right strategy for a time we’re no longer living in. “That was Goldilocks. It wasn’t normal, it was an anomaly,” Eric Crittenden, the chief investment officer of management firm Standpoint, told the WSJ.
- Brian Boyle
I doubt the Fed will lower rates anytime soon. We are still in the inflection point of a rate turnaround similar to the late '70s & early '80s. Only when the rates have saturated the economy then they will probably go back to the 60/40 behavior. That might be 2024 or much later.
Seems like its best to still go long 3-6 month & short 10-30 yr. I used to trade the TLT based on RSI and it is basically broken. It just goes lower & lower no matter how oversold it is just like the USD keeps going higher & higher.
The TLT reversion in the middle of another 1973 type war was incredibly short lived. I think if the TLT doesn't come back soon there could be a flash crash or a 1987 type event. Just imagine if the lunatics at the BoJ finally wake up to their inflation rate of 3+% and decide to end their ZIRP nonsense.
Seems like its best to still go long 3-6 month & short 10-30 yr. I used to trade the TLT based on RSI and it is basically broken. It just goes lower & lower no matter how oversold it is just like the USD keeps going higher & higher.
The TLT reversion in the middle of another 1973 type war was incredibly short lived. I think if the TLT doesn't come back soon there could be a flash crash or a 1987 type event. Just imagine if the lunatics at the BoJ finally wake up to their inflation rate of 3+% and decide to end their ZIRP nonsense.