Oct 31 2008
Playing for a rise in interest rates
One of the big things on my mind in recent days is setting up for a short play in US Treasury Bonds. The basic idea is that once the uncertainty and other issues we’ve got going on now settle down, US interest rates are going to to be heading higher, and in a serious way. One of my colleagues actually pointed out that 10-year T-Notes have actually gone sideways since the stock market peak in August. That suggests there aren’t many buyers on the long end of the yield curve. Given the potential for some serious inflationary pressures thanks to all the money sloshing around the world right now, I can’t blame those long-term investors.
Of course the question is always one of timing. Making a play on a cyclical change in the direction of long-term interest rates is tricky. Short-term oscillations can cause problems. That makes taking a position in futures potentially challenging. With that in mind, I thought to go the ETF route. To that end I found the UltraShort Lehman 20+ Year Treasury (TBT).
The chart is really interesting. Looks like an inverse head-and-shoulders type of set up to me. The projection off a break would be a $10 gain – and that’s just a daily chart set-up. I’m of course thinking much longer-term than that.
Here are some other posts which might interest you:
