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Thread: shorting U.S. bonds

  1. #1

    Default shorting U.S. bonds

    Jim Rogers has mentioned several times that he is shorting U.S. treasuries. What does he mean by this and how can we do the same?



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  3. #2

    Default

    Quote Originally Posted by jy006m View Post
    Jim Rogers has mentioned several times that he is shorting U.S. treasuries. What does he mean by this and how can we do the same?
    I believe TBT is one way.

  4. #3

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    TLT is an ETF that is long the twenty-year bond I believe, so you could sell it short.
    Last edited by Cowlesy; 01-04-2009 at 11:09 AM.
    "Your mother's dead, before long I'll be dead, and you...and your brother and your sister and all of her children, all of us dead, all of us..rotting in the ground. It's the family name that lives on. It's all that lives on. Not your personal glory, not your honor, but family." - Tywin Lannister


  5. #4

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    What exactly is the concept? Betting on a rise in the treasury interest rates? If the interest rate rises, the value of the bond decreases?

  6. #5

    Default

    Quote Originally Posted by jy006m View Post
    What exactly is the concept? Betting on a rise in the treasury interest rates? If the interest rate rises, the value of the bond decreases?
    correct.
    "Your mother's dead, before long I'll be dead, and you...and your brother and your sister and all of her children, all of us dead, all of us..rotting in the ground. It's the family name that lives on. It's all that lives on. Not your personal glory, not your honor, but family." - Tywin Lannister


  7. #6

    Default

    I'm trying to short sell TBT on Etrade and it won't let me do it. Are there are other ways?

  8. #7

    Default TBT is a short already on bonds

    Quote Originally Posted by jy006m View Post
    I'm trying to short sell TBT on Etrade and it won't let me do it. Are there are other ways?
    you want to go long it!

  9. #8

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    Quote Originally Posted by jy006m View Post
    I'm trying to short sell TBT on Etrade and it won't let me do it. Are there are other ways?
    It is already tracking the inverse of the 20 year bond, so you would want to go LONG TBT.

    If the 20 yr yield goes higher, TBT will increase in value as the value of the bond decreases.
    "Your mother's dead, before long I'll be dead, and you...and your brother and your sister and all of her children, all of us dead, all of us..rotting in the ground. It's the family name that lives on. It's all that lives on. Not your personal glory, not your honor, but family." - Tywin Lannister


  10. #9

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    Ahh ok. That explains the drop from $70 to the current $39. What is the price tied to?

    Also, so if I long it, does this mean I won't have to do the stuff that short sellers normally have to do? like have a margin account that pays interest and having to cover the short?

  11. #10

    Default

    Quote Originally Posted by jy006m View Post
    Also, so if I long it, does this mean I won't have to do the stuff that short sellers normally have to do? like have a margin account that pays interest and having to cover the short?
    Nope, no margin, no loans, no interest.

    That's why ETFs are all the rage.

  12. #11

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    So the 20 year treasury is at 3.22% right now? How do I calculate what TBT would be if say it went to 2.5% or 4% or 5%, etc?

  13. #12

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    Can someone please explain why you would want to short U.S. bonds? I understand the public may lose confidence and stop investing, which would raise rates, but do you not factor in that the Government will find a way into the market...keeping the rates low?
    Privatize the profits, socialize the losses. - Government at its best.

  14. #13

    Default

    Quote Originally Posted by icon124 View Post
    Can someone please explain why you would want to short U.S. bonds? I understand the public may lose confidence and stop investing, which would raise rates, but do you not factor in that the Government will find a way into the market...keeping the rates low?
    Because it would have made you a lot of money up until 10 months ago.

  15. #14

    Default

    I don't know who will keep buying our debt with the interest rates so low....

    China takes the dollars its mfr companies receive from us , give the mfr's China currency , buy UNITED STATES T- bill's and notes....How long will they be happy to receive such a low interest rate ?

    Is anyone on the board buying US t-bill's or notes ? I think not....

    I think interest rates are very close to the bottom.....

  16. #15

    Default

    Quote Originally Posted by icon124 View Post
    Can someone please explain why you would want to short U.S. bonds? I understand the public may lose confidence and stop investing, which would raise rates, but do you not factor in that the Government will find a way into the market...keeping the rates low?
    No one is going to be willing to buy treasury bonds at 2%, its insane to even think about. The dollar just had an excellent run up against the Euro and GBP but its just about over, when the dollar drops in value so does the value of our treasuries to foreigners.

    Foreigners made bank on Treasuries in the past few months as the USD gained in value, but its over. When the USD starts dropping the last thing you want to own is treasury bonds, especially at 2% per year.

    With TBT and gold you can create the perfect hedge. If no one buys treasuries, the dollar drops TBT and gold rises dramatically. If the FED hops in to buy treasuries, TBT drops while gold soars. You can only earn with this setup, there is no way to lose any real amount of money.

  17. #16

    Default

    Quote Originally Posted by Jordan View Post
    No one is going to be willing to buy treasury bonds at 2%, its insane to even think about. The dollar just had an excellent run up against the Euro and GBP but its just about over, when the dollar drops in value so does the value of our treasuries to foreigners.

    Foreigners made bank on Treasuries in the past few months as the USD gained in value, but its over. When the USD starts dropping the last thing you want to own is treasury bonds, especially at 2% per year.

    With TBT and gold you can create the perfect hedge. If no one buys treasuries, the dollar drops TBT and gold rises dramatically. If the FED hops in to buy treasuries, TBT drops while gold soars. You can only earn with this setup, there is no way to lose any real amount of money.
    You're assuming the dollar loses enough value. If it doesn't then there is plenty to lose.

    Quote Originally Posted by danberkeley View Post
    Because it would have made you a lot of money up until 10 months ago.
    Okay...but I'm looking into the future and not 10 months ago.
    Privatize the profits, socialize the losses. - Government at its best.

  18. #17

    Default

    Quote Originally Posted by icon124 View Post
    You're assuming the dollar loses enough value. If it doesn't then there is plenty to lose.
    First consider that the US has to sell $2 Trillion worth of Treasuries this year to fund its operations. Also, 40% of privately held US debt hits the auction block this year. There are going to be tons of treasuries and little money to buy them with.

    Look at these two scenarios again:

    Fed buys Treasuries, treasury rates drop like a rock and so does the dollar.
    Private investors buy Treasuries, rates go up. Dollar about the same.

    I don't really care what you do. I'm not here to convince you to make the trade, but I'll be the first one back in this thread in 6 months to tell you how bad you missed out.

  19. #18

    Default

    Quote Originally Posted by icon124 View Post
    You're assuming the dollar loses enough value. If it doesn't then there is plenty to lose.



    Okay...but I'm looking into the future and not 10 months ago.
    Because ten years from now, it might have made you lots of money.

  20. #19

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    Quote Originally Posted by Cowlesy View Post
    correct.
    didn't it just go down to negative a few weeks ago?

  21. #20

  22. #21

  23. #22

    Default

    Quote Originally Posted by jy006m View Post
    So the 20 year treasury is at 3.22% right now? How do I calculate what TBT would be if say it went to 2.5% or 4% or 5%, etc?
    you can use duration of the 20 year bond as an approximate measure for price changes given yield changes as follows:

    duration of a 20-year bond is approximately 15 years. lets say the 20-year bond is priced at par (100) currently. the calculation for the price change uses the duration in years (15 here) times the market change in interest rates. Thus, if the 20-year bond yield rises to 5.22%, the price change would be equal to (15 * 2%) or roughly 30% and equal to 70 (vs 100 today). If the yield rose 1% to 4.22%, the price would decline 15 to 85.

    for your calc's if the yield went to 2.5% (dropped .72), the price would rise from 100 to 110.8; if yields rose to 4%, the price would drop to 88.3; at 5% the price would drop 73.3.

    These are rough calculations (on the duration side), but i hope you get the drift and i hope this helps.

    edit: i have absolutely no idea what this does to TBT prices as i'm not familiar with TBT, and i hope that if the information i've provided is not correct, someone will correct this.

  24. #23

  25. #24

    Default

    I had not pulled the trigger on TBT, but now I am thinking of buying some call options on it. When would the expiry date be?

  26. #25

    Default

    I had not pulled the trigger on TBT, but now I am thinking of buying some call options on it. When would the expiry date be?
    What is the advantage of call options vs. simply buying the etf?
    Read the Complete Ron Paul Book Collection!

  27. #26

    Default

    I can buy much more. At $41 per share, I might only be able to buy 50 shares, but at a $0.80 contract price, I could buy 2000+.

  28. #27

    Default

    If TBT tracks the inverse of the "Lehman Brothers 20+ Year U.S. Treasury index", and Lehman is now bankrupt, is this fund even safe to own long-term? Is that index still around?

  29. #28

    Default

    Quote Originally Posted by pa33 View Post
    If TBT tracks the inverse of the "Lehman Brothers 20+ Year U.S. Treasury index", and Lehman is now bankrupt, is this fund even safe to own long-term? Is that index still around?
    It's an index. The ETN is not issued by Lehman but it follows and index that Lehman set up.

  30. #29

    Exclamation shorting U.S. bonds... The Bond Bubble abiut to BURST!

    Quote Originally Posted by danberkeley View Post
    It's an index. The ETN is not issued by Lehman but it follows and index that Lehman set up.

    GET OUT NOW!

    Barrons too, is reporting what Peter Schiff, Rogers, and Others have been saying this week!

    Here's the link on the BOND BUBBLE readied to go NUCLEAR!

    http://online.barrons.com/article/SB...rrons&ru=yahoo

    The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons -- and could provide competitive returns with stocks, even if the equity markets have a strong 2009. (Video)
    Last edited by HOLLYWOOD; 01-10-2009 at 07:09 PM.
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    June 1826



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  31. #30

    Default

    Quote Originally Posted by HOLLYWOOD View Post
    GET OUT NOW!

    Barrows is reporting what Peter Schiff, Rogers, and Others have been saying this week!

    Here; the link on the BOND BUBBLE readied to go NUCLEAR!

    http://online.barrons.com/article/SB...rrons&ru=yahoo

    The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons -- and could provide competitive returns with stocks, even if the equity markets have a strong 2009. (Video)
    Get out of what?

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