Sunday, February 6, 2011

Time to short US Treasury bonds




The chart above is for the Ultrashort 20+ year Treasury ETF. As interest rates on government debt rise this ETF goes up in price. In addition because it is an ultra short fund it move 2X the move of the long term bond. Conversely if interest rates go down this ETF will go down in price. That is why this is not a buy and hold type trade. As can be seen the price appears to have broken out last week to the upside. As long as the momentum continues up I will stay with this trade. I have the wind at my sails on this trade as I expect interest rates to head higher as inflation increases and the US Government continues to issue record amounts of debt. In order to attract sufficient investor interest in buying government bonds interest rates are going to have to head higher.This is not advice and please do your own due diligence.

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