Why are LTT rallying now? Vineviz??

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guppyguy
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Why are LTT rallying now? Vineviz??

Post by guppyguy »

So, if the fed has announced that they will raise rates a year earlier one would think that LTT would decline? But that's not what has happened over the past 2 days. (Yes I know its just 2 days)

I bring this up to re-start the long standing conversation of whether the inevitable rise in interest rates are by default ill for long duration treasuries. Just trying to understand a little better. :D
Last edited by guppyguy on Sat Jun 19, 2021 9:29 am, edited 1 time in total.
langlands
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Re: Why are LTT rallying now? Vivienz??

Post by langlands »

1 to 3 year yields are spiking while long duration yields are dropping. Short end of yield curve is steepening while long end is flattening.
fabdog
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Re: Why are LTT rallying now? Vivienz??

Post by fabdog »

the fed announced they might start raising short term rates 2 years from now (late 2023) instead of 2024.

Who know what will really happen, but it's almost certain to not be exactly the scenario they laid out... it may be even earlier if economy continues to be strong, or if things fall off, maybe not

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Robot Monster
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Re: Why are LTT rallying now? Vivienz??

Post by Robot Monster »

Kathy Jones, Chief Fixed Income Strategist for Schwab, tweeted that: "in the past, ending QE/tapering has led to a flatter yield curve"
link
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
thenextguy
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Re: Why are LTT rallying now? Vivienz??

Post by thenextguy »

Robot Monster wrote: Fri Jun 18, 2021 10:01 am Kathy Jones, Chief Fixed Income Strategist for Schwab, tweeted that: "in the past, ending QE/tapering has led to a flatter yield curve"
link
This makes sense actually. The yield curve is steepest earliest in the business cycle and begins to flatten as it progresses. At the end it usually inverts.
JPM
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Re: Why are LTT rallying now? Vivienz??

Post by JPM »

Maybe Jeffrey Snider is right, that a shortage of good or even OK collateral has been a cause of elevated prices in the bond markets. Greek bonds are going at negative interest. What else could explain such a thing as that?
Elysium
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Re: Why are LTT rallying now? Vivienz??

Post by Elysium »

The lesson is don't try to second guess rate directions and bond prices into future, instead match your portfolio needs to the type of bonds you wish to own.
garlandwhizzer
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Re: Why are LTT rallying now? Vivienz??

Post by garlandwhizzer »

Raising short term rates and monetary policy tightening in general tends to put the brakes on the economy and keep it from overheating. Hence it reduces the long term risk of increasing inflation which is the greatest single risk to LTT. In short the FED's recent discussion about tightening monetary policy gives some assurance to those holding LTT that the FED won't let inflation get out of hand. The greatest risk to LTT is long term cumulative inflation, not short term rates, and it may be reassuring to holders of LTT that FED is not going to let inflation get out of control. Raising short term rates hits the principal value of short term bonds, causing them to sell off, but its effect on long term bonds can be just the opposite as investors are reassured about inflation control.

Garland Whizzer
typical.investor
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Re: Why are LTT rallying now? Vivienz??

Post by typical.investor »

guppyguy wrote: Fri Jun 18, 2021 9:17 am So, if the fed has announced that they will raise rates a year earlier one would think that LTT would decline? But that's not what has happened over the past 2 days. (Yes I know its just 2 days)

I bring this up to re-start the long standing conversation of whether the inevitable rise in interest rates are by default ill for long duration treasuries. Just trying to understand a little better. :D
The WSJ speculates that since many bets were placed on rising rates, many investors recently had to cover their positions by buying back treasury bonds which lowered rates.
The most likely reason in positioning. The positioning was too short
NoRegret
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Re: Why are LTT rallying now? Vivienz??

Post by NoRegret »

guppyguy wrote: Fri Jun 18, 2021 9:17 am So, if the fed has announced that they will raise rates a year earlier one would think that LTT would decline? But that's not what has happened over the past 2 days. (Yes I know its just 2 days)

I bring this up to re-start the long standing conversation of whether the inevitable rise in interest rates are by default ill for long duration treasuries. Just trying to understand a little better. :D
Higher short term rates will control long term inflation so good for long bonds.

At least that is the narrative. Reality is equal parts of positioning, narrative driven by price action rather than the other way around, and willful self delusion.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
Big Dog
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Re: Why are LTT rallying now? Vivienz??

Post by Big Dog »

LTT = Long Term Treasuries???
Robot Monster
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Re: Why are LTT rallying now? Vivienz??

Post by Robot Monster »

Big Dog wrote: Fri Jun 18, 2021 10:01 pm LTT = Long Term Treasuries???
Yes. And Vivienz = vineviz
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
PowderDay9
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Re: Why are LTT rallying now? Vivienz??

Post by PowderDay9 »

Is it me or is there way less threads on LTT now? They're down YTD and down about 15% over the last year. With inflation fears I guess the big LTT fans are no longer trying to convince everyone to buy them.
chem6022
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Re: Why are LTT rallying now? Vivienz??

Post by chem6022 »

PowderDay9 wrote: Fri Jun 18, 2021 10:31 pm Is it me or is there way less threads on LTT now? They're down YTD and down about 15% over the last year. With inflation fears I guess the big LTT fans are no longer trying to convince everyone to buy them.
A couple of years ago I realized I might want to retire in 5 years. So I decided it was time to swap to 20% LTT right away. I am still headed towards 60/40 in a combination of LTT and short-term TIPS for when I am ready to retire. Honestly watching the movements over the last couple of years they do exactly what I wanted from them. Sure they were down 25% when equities were up 50%, but they were also up 25% when the market was down 30%. Overall they serve the exact portfolio volatility stabilization purpose I wanted them to serve.
acegolfer
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Re: Why are LTT rallying now? Vivienz??

Post by acegolfer »

One of the common misconceptions ppl have with bonds is they think there's 1 interest rate. OP probably thinks Fed funds rate = LTT yield. As noted by others, these 2 are not only different but can also move in the opposite direction.
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guppyguy
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Re: Why are LTT rallying now? Vivienz??

Post by guppyguy »

Robot Monster wrote: Fri Jun 18, 2021 10:23 pm
Big Dog wrote: Fri Jun 18, 2021 10:01 pm LTT = Long Term Treasuries???
Yes. And Vivienz = vineviz
Thanks! Thats what I meant :sharebeer
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guppyguy
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Re: Why are LTT rallying now? Vivienz??

Post by guppyguy »

acegolfer wrote: Sat Jun 19, 2021 6:29 am One of the common misconceptions ppl have with bonds is they think there's 1 interest rate. OP probably thinks Fed funds rate = LTT yield. As noted by others, these 2 are not only different but can also move in the opposite direction.
I've fallen in that trap. Interest rates and inflation are two separate things, with the former often influencing the later. Also, the Fed only controls short term rates, long term rates much less influence.

The thing I find interesting with investing is just how nuanced many of the ideas are and how much meaning is lost with sometimes over simplifying complicated concepts. Very messy.
Robot Monster
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Re: Why are LTT rallying now? Vivienz??

Post by Robot Monster »

guppyguy wrote: Sat Jun 19, 2021 9:23 am
Robot Monster wrote: Fri Jun 18, 2021 10:23 pm
Big Dog wrote: Fri Jun 18, 2021 10:01 pm LTT = Long Term Treasuries???
Yes. And Vivienz = vineviz
Thanks! Thats what I meant :sharebeer
Bogleheads needs to install a Bat-Signal for vineviz.
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keith6014
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Re: Why are LTT rallying now? Vineviz??

Post by keith6014 »

When should we expect mortgage rates to drop?
Angst
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Re: Why are LTT rallying now? Vivienz??

Post by Angst »

garlandwhizzer wrote: Fri Jun 18, 2021 12:12 pm Raising short term rates and monetary policy tightening in general tends to put the brakes on the economy and keep it from overheating. Hence it reduces the long term risk of increasing inflation which is the greatest single risk to LTT. In short the FED's recent discussion about tightening monetary policy gives some assurance to those holding LTT that the FED won't let inflation get out of hand. The greatest risk to LTT is long term cumulative inflation, not short term rates, and it may be reassuring to holders of LTT that FED is not going to let inflation get out of control. Raising short term rates hits the principal value of short term bonds, causing them to sell off, but its effect on long term bonds can be just the opposite as investors are reassured about inflation control.

Garland Whizzer
Although shouldn't the prospect of a winding down of Fed QE policy (buying less/liquidating inventory) at some point contribute somewhat to a rise in longer term rates? Or perhaps the relief of inflation concerns has overwhelmed it for now?
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guppyguy
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Re: Why are LTT rallying now? Vivienz??

Post by guppyguy »

Angst wrote: Sat Jun 19, 2021 1:13 pm
garlandwhizzer wrote: Fri Jun 18, 2021 12:12 pm Raising short term rates and monetary policy tightening in general tends to put the brakes on the economy and keep it from overheating. Hence it reduces the long term risk of increasing inflation which is the greatest single risk to LTT. In short the FED's recent discussion about tightening monetary policy gives some assurance to those holding LTT that the FED won't let inflation get out of hand. The greatest risk to LTT is long term cumulative inflation, not short term rates, and it may be reassuring to holders of LTT that FED is not going to let inflation get out of control. Raising short term rates hits the principal value of short term bonds, causing them to sell off, but its effect on long term bonds can be just the opposite as investors are reassured about inflation control.

Garland Whizzer
Although shouldn't the prospect of a winding down of Fed QE policy (buying less/liquidating inventory) at some point contribute somewhat to a rise in longer term rates? Or perhaps the relief of inflation concerns has overwhelmed it for now?
Somebody correct me if I'm wrong but I believe the Fed's program involves buying mostly short-intermediate treasuries.
Angst
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Re: Why are LTT rallying now? Vivienz??

Post by Angst »

guppyguy wrote: Sat Jun 19, 2021 3:24 pm
Angst wrote: Sat Jun 19, 2021 1:13 pm
garlandwhizzer wrote: Fri Jun 18, 2021 12:12 pm Raising short term rates and monetary policy tightening in general tends to put the brakes on the economy and keep it from overheating. Hence it reduces the long term risk of increasing inflation which is the greatest single risk to LTT. In short the FED's recent discussion about tightening monetary policy gives some assurance to those holding LTT that the FED won't let inflation get out of hand. The greatest risk to LTT is long term cumulative inflation, not short term rates, and it may be reassuring to holders of LTT that FED is not going to let inflation get out of control. Raising short term rates hits the principal value of short term bonds, causing them to sell off, but its effect on long term bonds can be just the opposite as investors are reassured about inflation control.

Garland Whizzer
Although shouldn't the prospect of a winding down of Fed QE policy (buying less/liquidating inventory) at some point contribute somewhat to a rise in longer term rates? Or perhaps the relief of inflation concerns has overwhelmed it for now?
Somebody correct me if I'm wrong but I believe the Fed's program involves buying mostly short-intermediate treasuries.
I believe the majority of their current holdings would be considered either intermediate or long-term maturity.

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WillRetire
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Re: Why are LTT rallying now? Vineviz??

Post by WillRetire »

To those who do not need to draw from their investments within the next 10 years, or ever, please disregard this post. :happy

________________________________________________________________
LTTs, which I believe are 20 & 30 year treasury bonds, are a flight-to-safety play/bet. A bet or hedge against the stock market whose valuations are quite high.

This week's WealthTrack guest is Robert Kessler whose predictions on inflation and LTTs have been correct for decades. His *predictions on the stock market less so, but like all prognosticators, one day his stock market prediction will come true.

(*)He doesn't really try to predict the stock market, but rather he sounds the alarm (frequently) about it being overvalued.

Here are some of the points he makes this week:
  • The stock market was overvalued before the pandemic, and is even more so now. It is in a danger zone.
  • Treasuries are inversely correlated to the stock market. Therefore, buy some now. Not gold.
  • Other developed countries' treasury rates are near zero or negative, whereas U.S. Treasuries are a deal. (cheap)
    He made this point about 10-year treasuries but his advice was to buy LTTs.
Link to video of this WealthTrack episode:
https://wealthtrack.com/exclusive-with- ... ng-danger/
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anon_investor
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Re: Why are LTT rallying now? Vineviz??

Post by anon_investor »

WillRetire wrote: Sun Jun 20, 2021 7:50 am To those who do not need to draw from their investments within the next 10 years, or ever, please disregard this post. :happy

________________________________________________________________
LTTs, which I believe are 20 & 30 year treasury bonds, are a flight-to-safety play/bet. A bet or hedge against the stock market whose valuations are quite high.

This week's WealthTrack guest is Robert Kessler whose predictions on inflation and LTTs have been correct for decades. His *predictions on the stock market less so, but like all prognosticators, one day his stock market prediction will come true.

(*)He doesn't really try to predict the stock market, but rather he sounds the alarm (frequently) about it being overvalued.

Here are some of the points he makes this week:
  • The stock market was overvalued before the pandemic, and is even more so now. It is in a danger zone.
  • Treasuries are inversely correlated to the stock market. Therefore, buy some now. Not gold.
  • Other developed countries' treasury rates are near zero or negative, whereas U.S. Treasuries are a deal. (cheap)
    He made this point about 10-year treasuries but his advice was to buy LTTs.
Link to video of this WealthTrack episode:
https://wealthtrack.com/exclusive-with- ... ng-danger/
So VTSAX and chill if you plan to retire more than 10 years from now?
WillRetire
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Re: Why are LTT rallying now? Vineviz??

Post by WillRetire »

anon_investor wrote: Sun Jun 20, 2021 7:55 am
WillRetire wrote: Sun Jun 20, 2021 7:50 am To those who do not need to draw from their investments within the next 10 years, or ever, please disregard this post. :happy

________________________________________________________________
LTTs, which I believe are 20 & 30 year treasury bonds, are a flight-to-safety play/bet. A bet or hedge against the stock market whose valuations are quite high.

This week's WealthTrack guest is Robert Kessler whose predictions on inflation and LTTs have been correct for decades. His *predictions on the stock market less so, but like all prognosticators, one day his stock market prediction will come true.

(*)He doesn't really try to predict the stock market, but rather he sounds the alarm (frequently) about it being overvalued.

Here are some of the points he makes this week:
  • The stock market was overvalued before the pandemic, and is even more so now. It is in a danger zone.
  • Treasuries are inversely correlated to the stock market. Therefore, buy some now. Not gold.
  • Other developed countries' treasury rates are near zero or negative, whereas U.S. Treasuries are a deal. (cheap)
    He made this point about 10-year treasuries but his advice was to buy LTTs.
Link to video of this WealthTrack episode:
https://wealthtrack.com/exclusive-with- ... ng-danger/
So VTSAX and chill if you plan to retire more than 10 years from now?
That's between you and your risk-tolerance psyche. If you panic-sell during the next crash, then perhaps 100% VTSAX isn't right for you either, and perhaps you should buy some LTTs now.
taojaxx
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Re: Why are LTT rallying now? Vineviz??

Post by taojaxx »

WillRetire wrote: Sun Jun 20, 2021 7:50 am To those who do not need to draw from their investments within the next 10 years, or ever, please disregard this post. :happy

________________________________________________________________
LTTs, which I believe are 20 & 30 year treasury bonds, are a flight-to-safety play/bet. A bet or hedge against the stock market whose valuations are quite high.

This week's WealthTrack guest is Robert Kessler whose predictions on inflation and LTTs have been correct for decades. His *predictions on the stock market less so, but like all prognosticators, one day his stock market prediction will come true.

(*)He doesn't really try to predict the stock market, but rather he sounds the alarm (frequently) about it being overvalued.

Here are some of the points he makes this week:
  • The stock market was overvalued before the pandemic, and is even more so now. It is in a danger zone.
  • Treasuries are inversely correlated to the stock market. Therefore, buy some now. Not gold.
  • Other developed countries' treasury rates are near zero or negative, whereas U.S. Treasuries are a deal. (cheap)
    He made this point about 10-year treasuries but his advice was to buy LTTs.
Link to video of this WealthTrack episode:
https://wealthtrack.com/exclusive-with- ... ng-danger/
Couldn't agree more with Robert Kessler (whom I had never heard of). Except on the "overvalued" part, which is just a variation of market timing.
Better lucky than smart.
WillRetire
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Re: Why are LTT rallying now? Vineviz??

Post by WillRetire »

taojaxx wrote: Sun Jun 20, 2021 10:15 am ...
Couldn't agree more with Robert Kessler (whom I had never heard of). Except on the "overvalued" part, which is just a variation of market timing.
Rebalancing is still a good boglehead thing to do periodically. LTTs are a consideration when shifting from stocks to bonds to maintain target AA.
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anon_investor
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Re: Why are LTT rallying now? Vineviz??

Post by anon_investor »

WillRetire wrote: Sun Jun 20, 2021 8:21 am
anon_investor wrote: Sun Jun 20, 2021 7:55 am
WillRetire wrote: Sun Jun 20, 2021 7:50 am To those who do not need to draw from their investments within the next 10 years, or ever, please disregard this post. :happy

________________________________________________________________
LTTs, which I believe are 20 & 30 year treasury bonds, are a flight-to-safety play/bet. A bet or hedge against the stock market whose valuations are quite high.

This week's WealthTrack guest is Robert Kessler whose predictions on inflation and LTTs have been correct for decades. His *predictions on the stock market less so, but like all prognosticators, one day his stock market prediction will come true.

(*)He doesn't really try to predict the stock market, but rather he sounds the alarm (frequently) about it being overvalued.

Here are some of the points he makes this week:
  • The stock market was overvalued before the pandemic, and is even more so now. It is in a danger zone.
  • Treasuries are inversely correlated to the stock market. Therefore, buy some now. Not gold.
  • Other developed countries' treasury rates are near zero or negative, whereas U.S. Treasuries are a deal. (cheap)
    He made this point about 10-year treasuries but his advice was to buy LTTs.
Link to video of this WealthTrack episode:
https://wealthtrack.com/exclusive-with- ... ng-danger/
So VTSAX and chill if you plan to retire more than 10 years from now?
That's between you and your risk-tolerance psyche. If you panic-sell during the next crash, then perhaps 100% VTSAX isn't right for you either, and perhaps you should buy some LTTs now.
I keep a large emergency fund, which helps me stay the course. I had LTT in spring 2020, which I rebalance into equities. If I were to "stock up" on LTT now it would be for tactical reasons, as I have 0 need for my money in equities for over 10 years (because I have a large emergency fund).
Buddtholomew
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Re: Why are LTT rallying now? Vivienz??

Post by Buddtholomew »

garlandwhizzer wrote: Fri Jun 18, 2021 12:12 pm Raising short term rates and monetary policy tightening in general tends to put the brakes on the economy and keep it from overheating. Hence it reduces the long term risk of increasing inflation which is the greatest single risk to LTT. In short the FED's recent discussion about tightening monetary policy gives some assurance to those holding LTT that the FED won't let inflation get out of hand. The greatest risk to LTT is long term cumulative inflation, not short term rates, and it may be reassuring to holders of LTT that FED is not going to let inflation get out of control. Raising short term rates hits the principal value of short term bonds, causing them to sell off, but its effect on long term bonds can be just the opposite as investors are reassured about inflation control.

Garland Whizzer
This is in-line with my thought processes as well.
Also, raising interest rates reduces borrowing that can result in a slowing economy or even recession. LTT’s have performed well under these circumstances.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
Gaston
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Re: Why are LTT rallying now? Vineviz??

Post by Gaston »

Sorry, help me understand. If prognosticators are predicting rising interest rates in the coming year or two, why are LTTs the way to go? Seems like short to medium term treasuries would offer a smoother ride with greater returns. What am I missing? Is there something special about LTTs?
Topic Author
guppyguy
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Re: Why are LTT rallying now? Vineviz??

Post by guppyguy »

Gaston wrote: Sun Jun 20, 2021 7:18 pm Sorry, help me understand. If prognosticators are predicting rising interest rates in the coming year or two, why are LTTs the way to go? Seems like short to medium term treasuries would offer a smoother ride with greater returns. What am I missing? Is there something special about LTTs?
Because by raising short term interest rates the Fed is decreasing the chances of long term inflation eroding the value of long term treasuries.
However, at some point the yield curve might begin to stop flattening as long term yields begin to rise again.
Angst
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Re: Why are LTT rallying now? Vineviz??

Post by Angst »

guppyguy wrote: Sun Jun 20, 2021 7:47 pm
Gaston wrote: Sun Jun 20, 2021 7:18 pm Sorry, help me understand. If prognosticators are predicting rising interest rates in the coming year or two, why are LTTs the way to go? Seems like short to medium term treasuries would offer a smoother ride with greater returns. What am I missing? Is there something special about LTTs?
Because by raising short term interest rates the Fed is decreasing the chances of long term inflation eroding the value of long term treasuries.
However, at some point the yield curve might begin to stop flattening as long term yields begin to rise again.
The "taper tantrum" wasn't simply about the Fed slowly ratcheting up the FFR, it was about the prospect of the Fed liquidating inventory. They currently hold much more in notes and bonds than in bills and it's not just intermediate term. It's not unreasonable to think about the possibility of LTT getting hit hard once the unwinding begins. The only easy answer, if there's one at all, is to stay the course you've already set.
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Beensabu
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Re: Why are LTT rallying now? Vineviz??

Post by Beensabu »

Traders speculate in LTTs. They didn't really so much in decades prior. But now that yields are (and have been) low, that is when there is greater opportunity for short term appreciation. There is also a greater possibility of larger short-term losses. But the potential upside is somewhat higher than the potential downside. Plus they go and add (questionably absurd levels of) leverage to their shenanigans. So you should be aware that has been going on for the last decade and still is, because it is. That's why you see what you see.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."
Hyperchicken
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Re: Why are LTT rallying now? Vineviz??

Post by Hyperchicken »

Treasury rates are falling off a cliff. Back to February 2021 levels. I'll take a peek at how my VGLT position is doing tomorrow.
tomsense76
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Re: Why are LTT rallying now? Vineviz??

Post by tomsense76 »

Beensabu wrote: Sun Jun 20, 2021 9:26 pm Traders speculate in LTTs. They didn't really so much in decades prior. But now that yields are (and have been) low, that is when there is greater opportunity for short term appreciation. There is also a greater possibility of larger short-term losses. But the potential upside is somewhat higher than the potential downside. Plus they go and add (questionably absurd levels of) leverage to their shenanigans. So you should be aware that has been going on for the last decade and still is, because it is. That's why you see what you see.
Yeah exactly. Michael Burry is shorting treasuries. If others also followed Burry into this trade, then it is not unreasonable to seem some spike as traders seek to cover their shorts. If the meme stock crowd is playing the other side of this bet, then we could see similar volatility in long term treasuries that we saw in GME, etc.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Hyperchicken
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Re: Why are LTT rallying now? Vineviz??

Post by Hyperchicken »

Hyperchicken wrote: Sun Jun 20, 2021 11:28 pm Treasury rates are falling off a cliff. Back to February 2021 levels. I'll take a peek at how my VGLT position is doing tomorrow.
...And VGLT is down 1%. Now back to our normal programming.
invest4
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Re: Why are LTT rallying now? Vineviz??

Post by invest4 »

I seriously considered LTTs when they were doing well, but decided I would simply be chasing performance. I think LTTs will be part of my portfolio at some point in the future, but the current uncertainty and potential volatility does not appeal to me. As i don't have any better insights or approaches, I continue to maintain my existing allocation to intermediate bonds (BND / BNDX) and new bond monies directed toward stable value (2% yield) with the expectation they will continue to do their job in regard to ballast against equity declines and options for re-balancing.
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