Not This Time

The last few times treasuries were in this area I shorted TBT as a way to gain long treasury exposure. The reason I did so was because negative sentiment on treasuries was extreme. Everyone and their mother was recommending a short treasury trade so I went long.

We are currently sitting less than a percent away from a new six month low and sentiment is not extreme this time around. I haven't heard a call to short treasuries in a long time. This time around could be the real thing. Higher rates would not be good for the economy or stock market.

3 comments:

aaron said...

You have any idea why treasuries are so weak today? I was thinking maybe it had something to do with the mortgage insurance rumors. Maybe people are realizing that we just cant afford all these gaurantees. Your thoughts?

Tsachy Mishal said...

I can make some guesses:
1)The strong durables report
2)Sovereign debt fears that include the US
3) healthcare reform costs
4) China is pissed about Google and flexing its muscles.


However, the reason is not so important to me. The most important thing to me is that this is happening without treasuries being oversold and without sentiment stretched which implies that the move can be sustained this time around, whereas in the past treasuries rallied strongly off these levels.

PJ said...

The general view is that China is sitting out this week's auctions as a warning against a harsh position in the upcoming April 15 Treasury assessment of whether China is a currency manipulator.