Long Term Bonds $TLT

Who else is bullish on long duration bonds in 2016? The rate hike cycle has finally begun after much anticipation. Who is left to sell bonds? I think the reward/risk is skewed in favor of the bulls. Also, if the Fed becomes more dovish in light of recent market turbulence, that should juice bonds.

low oil + low inflation = overheating

short

What is overheating, the US economy? Wouldn’t low inflation be good for bonds?

thats what the books are sayin L3 reading 15

Overheating really only happens when the sustained trajectory on wages grows faster than real GDP. If wages aren’t rising, the risk of overheating is fairly minimal.

From a pure supply/demand view, I’d argue that the Treasury’s shift towards more bills vs. bonds and the narrowing budget deficit will have the most affect. Additionally, if the Fed continues reinvesting the funds from its maturing debt that will provide support. Also, relative to other nations, especially in Europe (even the crappy ones), the US rate is already fairly high.

Hmm, I think I just convinced myself to be bullish… that’s no fun. I must be wrong.

continuing to move higher this morning despite positive equity markets

Klinko…the question is, how will the Fed reinvest that maturing debt. There’s so much maturing in the next 3-5 years that I can’t see them reinvesting in short term debt. I guess that’s bullish for intermediate treasuries…maybe also bullish for long term treasuries?

smh…probably because of the Japanese move to negative rates driving down their long term interest rates. That Japanese 10 year yielding 0.10% is just amazing.

My guess would be the Fed’s reinvestment decision is driven by where most of the supply in the market is, which is currently geared towards short-term.

Who knows though… if they view the economy picking up and if they keep “raising rates” without rates actually rising, they may have to shore up their balance sheet. I don’t see this happening anytime soon though, so your hypothesis probably has more in its favor than against.

Disclosure: I change my opinion on bonds nearly every week for all of these “what if” reasons. It’s tough to trade a centrally planned market (aside from the 7 years of buying S&P and enjoying QE). I mostly stay away from bonds.

30 year bonds futures up big this morning

bonds look attractive again

smh, you must have a short time-frame for that opinion right?

Long term government bonds generally yield around 2% above inflation, which would put the natural rate around 4% or so today. With 10 year yields under 2%, I can’t imagine you’ve got more than a few week time horizon.

Exactly, about a 4 week time horizon.