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American Capital Agency Corp. Message Board

  • mr.phil2u mr.phil2u Jan 21, 2013 2:45 PM Flag

    Short Bonds ?

    Onion or anyone!! How would one short bonds? Mario Gabelli in Barron,s says he is short bonds.

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    • "Inverse bond ETFs are designed to move opposite bond prices tied to their benchmark indexes.
      They allow you to prepare for bond price declines by hedging your portfolio....

      Nine ProShares Choices

      ProShares offers nine inverse bond ETFs across a range of fixed income market sectors:

      Short 20+ Year Treasury TBF -1x Barclays U.S. 20+ Year
      Treasury Bond Index 18.72 years

      UltraShort 20+ Year Treasury TBT -2x Barclays U.S. 20+ Year
      Treasury Bond Index 18.72 Years

      UltraPro Short 20+ Treasury TTT -3x Barclays U.S. 20+ Year
      Treasury Bond Index 18.72 Years

      Short 7-10 Year Treasury TBX -1x Barclays U.S. 7-10 Year
      Treasury Bond Index 7.74 Years

      UltraShort 7-10 Year Treasury PST -2x Barclays U.S. 7-10 Year
      Treasury Bond Index 7.74 Years

      UltraShort 3-7 Year Treasury TBZ -2x Barclays U.S. 3-7 Year
      Treasury Bond Index 4.57 Years

      UltraShort TIPS TPS -2x Barclays U.S. Treasury Inflation
      Protected Securities (TIPS) Index (Series-L) 5.28 Years

      Short High Yield SJB -1x Markit iBoxx $ Liquid High Yield Index 3.53 Years

      Short Investment Grade Corporate IGS -1x Markit iBoxx $ Liquid Investment Grade Index 7.77 Years"

      List from long duration to shorter. Going Long on different maturity funds above would effectively be shorting the bond market. I am not an expert on bonds though and have learned by listening to others who are, including Onion. So hopefully he will weigh in.

      Good luck,


    • Many of those inverse ETPs have huge tracking error problems. especially the leveraged ones. You may be able to actually short an unleveraged long ETF. I use the futures and options on futures.

      • 2 Replies to mmichaelr
      • Inverse and 2x, 3x ETFs: Massive, massive tracking.

        You should not hold an inverse for more than a short term (days, not weeks) trade. Triple inverses tend toward zero in the long run. Look at FAZ 5 year chart. Notice this equity assasin ETF FAZ managed to fall like a knife even as the financials were falling. Thats right, an inverse ETF with a direct correlation to the underlying assests. Oy vey.

        As for 3X, compare FAS 3x long to unlevered XLF over 5 years. A chart of sadness.

        These are radioactive vehicles that should be handled with care and suspicion.

      • I thought I had some saved articles about Direxion, iPath and ProShares tracking issues but I cannot find them. I may have just let them go when I reformatted my hard drive.

        You can short VCLT or LWC. Didn't Mario recommend long maturity Treasury short in last years Barron's roundtable?

        Two thoughts for you though. Mario's group runs some CEFs_maybe you can just ride with him via one of those. The other is Floating Rate ETPs (FLOT, FLRN, FLTR, BKLN), CEFs or I prefer the active management of Fidelity's FFRHX. You would benefit from the yield curve change and I guess you could margin for leverage once the trend change is in place.

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