Treasuries In Pictures

The chart below is the ten year treasury yield from Yahoo! Finance. I underlined the rise in yields over the past month. Yields have shot up and treasury prices have shot straight down.


Before this move higher there was not much talk about shorting treasuries. However, recently the bearish talk about treasuries has reached a fever pitch. Doesn't it always work that way?

In the long run treasury yields are likely heading higher. However, in the short run the consensus that yields will rise has become too pat. In addition, the ten year treasury is reaching a point where it will seriously threaten the economy. If treasury prices continue their climb the rest of my portfolio should perform well as I am short interest rate sensitive sectors, while my longs have little interest rate sensitivity.

3 comments:

Anonymous said...

Tsachy, when you have a minute can you explain your trading stategy to me? I'm not criticizing. I just don't get it.
Maybe you can use the long GS short BAC as an example.

You seem to gte long one trade then short another in the same sector. Don't they cancel each other out? How do you make $ thanks

Tsachy Mishal said...

Looking at the BAC/GS trade as an example. The trade would have worked magnificently had I kept it on. BAC was at $15.35 while GS was at $162. BAC is 2% lower and GS is now 4% higher for a 6% gain on the trade, while the stock market has done almost nothing. You can go back in the archives to see the logic I used to decide on the trade.

I have been trying to find stocks that are undervalued to buy and short overvalued ones. This way my performance is not dependent on the direction of the market. I have not had a strong view on the overall market. If I have a strong view, I will often not hedge myself.

Anonymous said...

Thank you for clarifing.