The long T bond has done well this year reflecting a slowing in the pace of economic recovery, a
sell off in industrial commodities prices and the recent flight to quality. The T bond is now very
overbought relative to its 200 day m/a, is extended relative to its price range, and now sports
advisory sentiment which is excessively bullish (76% bullish on MarketVane).
For investors, the long T has provided a humble real return of between 2.0 -3.0% over the past
three years, so the real game here has been to trade the wide price swings in evidence over this
time. Sharp players have been able to earn up to 15% trading the unusual volatility of the market.
I am of the view the economy may do a little better than expected through year's end and also think
that industrial commodities prices will snap out of a seasonal funk over the remainder of the year.
So, I will be looking to short the long T in the weeks and months ahead.
My style of trading the Treasury is an uncommon one because it is contrarian, whereas most
traders are momentum players with very short time horizons. However, since I have been
trading bonds successfully this way for years on end, I hope you will give the price chart a
decent once over. $UBS chart
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