In my last 10-year trading post, I wrote that while momentum was negative for Treasury prices, we were sitting on a key support level, leaving the direction highly uncertain.
On Monday, 10's pushed through support at 3.48%, offering an entry for a short. I made a small short at 3.50% using TBT ($47.24). I was at 1/3 size. I figured I'd pile on if the 2-year auction stunk. I looked like a genius for about 4 hours. Then on Tuesday we rallied away most of my gain and the strong 2-year auction pushed the 10-year back through the 3.48% level. I sold TBT within seconds of the auction at $47.21.
Now we're extending the rally with 10s at 3.41%. If I were forced to pick a direction I'd guess we keep rallying into the low 3.30's, but of course the 5 and 7-year auctions could go poorly and completely upset that. My plan is currently to let it keep rallying and then re-set a short, most likely in front of the 3-10-30 auction cycle next week. I might fool around with trading right around the auctions today as well, but those will be very small sizes if I do it at all.
IF you know bonds so well why are you trading TBT versus the futures?
ReplyDeleteWhat is a bond vigilante? Are they extinct?
ReplyDeleteCheesy SW reworked quote:
ReplyDelete"Don't be too proud of this technological terror (i.e. the Fed) you've constructed. The ability to destroy a planet's currency is insignificant next to the power of the Deflationary Force(s)."
I had some ZN futures this week and sold the bastards for an insignificant profit...right before it blasted off. Damn you Bernanke!