Selling Short Long Bonds?????

[squiffy]

Bought some LUV. Bought some MRK. Any hot tips out there.

Don't know much about long-term bonds. Is there any kind of index, traded like the QQQ, which you could invest in, by seling short or buying a put???

In other words, if you believe inflation eventually will picks up and long-term bond prices will drop, is there an easy way to place a bet on this outcome via Ameritrade????

I bought 2 year puts for CFC at strike 90, which I think will eventually pay off. But then read an article that said why not be directly against long-term bonds, which makes a lot of sense. Betting against a stock is a lot more complicated that betting against the long-term value of a 10 year bond at 3% or whatever the current yield or rate is.

[adios]

I feel like I'm giving a junkie junk /images/graemlins/smile.gif. Anyway here's three for you. The Rydex Juno fund symbol RYJUX moves inversely to the 30 yr treasury.

Rydex Juno Fund (http://www.rydexfunds.com/website/fund_info_fset.cfm?rydexfundid=14&show=none)

Also you could short a couple of ETFs that I know of. One is TLT it's a 20 year + Treasury Bond Fund:
TLT Data (http://www.etfconnect.com/select/fundpages/fixed_etf.asp?MFID=93842)

TLT - iShares Lehman 20+Yr Treasury Bond Fund

INVESTMENT OBJECTIVE



The iShares Lehman 20+ Year Treasury Bond Fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the long-term sector of the United States Treasury market as defined by the Lehman Brothers 20+ Year Treasury Index. The Index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than 20 years. The Index is market capitalization weighted and includes all publicly issued, U.S. Treasury securities that have a remaining maturity greater than 20 years, are non-convertible, are denominated in U.S. dollars, are rated investment grade (Baa3 or better) by Moodys Investors Service, Inc., are fixed rate, and have more than $150 million par outstanding. Excluded from the Index are certain special issues, such as flower bonds, targeted investor notes (TINs), state and local government series bonds (SLGs), and coupon issues that have been stripped from assets that are already included in the Index. Since the Fund generally will invest at least 95% of its net assets in U.S. government bonds, the risks associated with investing in bonds generally will affect the Fund and the value of its assets.

You could also conceivably short the medium term treasurys:

IEF - iShares Lehman 7-10Yr Treasury Bond Fund (http://www.etfconnect.com/select/fundpages/fixed_etf.asp?MFID=93841)

IEF - iShares Lehman 7-10Yr Treasury Bond Fund

The iShares Lehman 7-10 Year Treasury Bond Fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the intermediate-term sector of the United States Treasury market as defined by the Lehman Brothers 7-10 Year Treasury Index. The Index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of between 7 and 10 years. The Index is market capitalization weighted and includes all publicly issued, U.S. Treasury securities that have a remaining maturity of between 7 and 10 years, are non-convertible, are denominated in U.S. dollars, are rated investment grade (Baa3 or better) by Moodys Investors Service, Inc., are fixed rate, and have more than $150 million par outstanding. Excluded from the Index are certain special issues, such as flower bonds, targeted investor notes (TINs), state and local government series bonds (SLGs), and coupon issues that have been stripped from assets that are already included in the Index. Since the Fund generally will invest at least 95% of its net assets in U.S. government bonds, the risks associated with investing in bonds generally will affect the Fund and the value of its assets.

You can also short Treasurys directly but I think that will require mucho bucks. BTW the 10 year closed at Yield-To-Maturity of 3.788% today.

[Ray Zee]

being an election year the fed isnt likely to jump rates. so your horizon for a big hit is out until next year at this time for probably the first of many interest rate rises. so you have to expect alot of cost waiting. but you may or will see some rise even though the fed rate stays low as its the market that will eventually set the fed rates.
watch out as stocks tend to rise in the first few periods of rising interest rates. sounds opposite but true. as the market feels that the first few raises signifies a growing economy. then after a few more they panic.
its not simple thats why things in general are always fairly valued for the current period. its anybodies guess what is out in the future. it is fun to speculate, but thats all it is.

[sfer]

It's not hard if you're a qualified investor with access to a private banker. Caps and floors are the common name for interest rate options, and you can effectively short the long end of the curve through incredibly liquid swaps. Also, lots of commercial mortgage-backed structures have a small inverse-floater piece which is equivalent to shorting various tenors of the Treasury curve.

But I dunno if you're gonna get these through Ameritrade.

EDIT: Here's what I wanted to convey but for some reason didn't. The instruments are out there and are abundant so you might as well call someone at your broker and see if they can get some for you.

[GeorgeF]

Recent recomomendation of stocks hitting lows, including LUV. (you may need to look at his archive of articles)
http://www.bloomberg.com/news/commentary/jdorfman.html

As far as shorting the long bond goes the last of the bond bulls might take the opposite side of your trade. Your bond short might cancel out your LUV position if interest rates rise with fuel costs.

http://www.hoisingtonmgt.com/hoisington_economic_overview.htm

[Wildbill]

Ray, I think you underestimate the potential for a bond yield jump precisely because the Fed may not move. I think rates could quickly spike if the market sees signs of inflation and the Fed sits on the sidelines because the election is near. I mean the long-term rate is all about future expectations, the one thing that could send that flying is if the traders get the impression the Fed won't control rates properly due to external issues.

[adios]

[Ray Zee]

bill, i said that in my last line of the first paragraph. but it cant spike too much if the fed doesnt move. that will take time to force it to adjust rates to the market. but of course the market forces the fed to act.
it is just too hard to bet on that happening although it may very well be the case here. i personally think inflation will be higher than expected in the future. too much spending and not enough growth,

[Wildbill]

Agreed completely Ray. I think the most overlooked fact is that external forces have been extremely helpful to us in our long disinflationary period. Japan and China had been in long deflationary spirals and through currency policy made sure the US shared in some of that. Now they are both looking the other way and the only significant area with disinflation is the EU and they are taking on new members that will jack up inflation there. There is just no way around it, we can't keep this up. China's inflation could get rather scary in the next few years if they don't do something drastic. In short with no sizable sources of locales with cheaper products or labor, inflation in this country has no way to go but up.

[scalf]

buy june 110 treasury puts....big bux...

warning..this may be correct (and might not be)..

dunya might keep the smoke and mirrors game going long enough to win election...but..

the feces hits the rotating steel objects big time within 6-9 months...the u.s. has still not cleansed itself of the excesses of irational investments...can interest rates go lower??

gl..short the treasuries...very low risk/potentially high gain situation..

jmho..gl /images/graemlins/cool.gif /images/graemlins/spade.gif

[adios]

[ QUOTE ]
...the u.s. has still not cleansed itself of the excesses of irational investments...

[/ QUOTE ]

Probably true but that would mean slower economic growth I would think.

[ QUOTE ]
can interest rates go lower??

[/ QUOTE ]

Sure they can. They were lower in 2003. Will they? I don't know but I don't think we'll see a 10 yr treasury at 5%+ anytime soon.

[Cazz]

There is an inverse bond fund.

Its the ProFunds "Rising Rates Oppurtunity" fund (Symbol RRPIX)

Link (http://www.profunds.com/profiles/profile.asp?id=69)

It is -21% since its inception and -9% YTD, but it did have a positive return for Q3 and Q4 last year.

[GeorgeF]

I you really are looking to short bonds short BHY. It owns 'junk' and sells at a 50% premium so there are more 'outs' than shorting government debt. Make sure you can pay the 9% dividend.

http://www.cefa.com/scripts/fundstat.asp?id=BHY&d=1