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  • musketeernumberone musketeernumberone Dec 10, 2010 6:02 PM Flag

    Is it time to short the long bond?

    Of course... the long bond is rising BECAUSE the economy is healing (thank you, Fed & Obama, for doing something) and equities are a better place to be.

    Now, when it gets to the moon -- and treasuries yield over, say, 8% (pls do not hold me to that number, I pulled it out of my ear)-- that is a different story... Obviously, at some point, the many imbalances come home to roost and/or the economy over-heats -- but that is a loooong way off.

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    • Musk, the federal reserve can come in and chop your head off at any time with a treasury short. They have not been buying 30 year bonds lately. They previously were though in an attempt to revive the housing market.

      Now it seems the fed is concentrating on reviving the banking sector, and to do that, it wants a steeper yield curve. That means the Fed is buying 2 and 5 year treasuries and leaving the 10 and 30 years alone.

      You gave some fundamental reasons why the 30 year should be higher, but there is only one question to ask: does Bernanke want the 30 year yields higher or lower? Right now, it appears he wants them higher, so they are a good short, but he could change his mind.

      Much like I mentioned with silver, there is so much central bank intervention right now, not just in the U.S. but all over the world, that investing/trading short term based on fundamentals is a fool's game.

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