My first bond trade: a success!
A quick 5% gain trading the 10 year
On June 15th I bought IEF at 98.8 when the 10 year was trading at 3.5%. I closed the position on August 8th with IEF at 104 and the 10 year somewhere around 2.75%. A gain of just over 5%.
A lot of investors seem to have an affinity for TLT, see Macro Alf @TheMacroCompass, but I pay attention to the 10 year and I wanted to buy lower duration.
It felt good to pick up a fast buck on that trade. Do I think that the bond bull market is over? Absolutely not! I think you could comfortably lay on a position today and be feeling great in a year or two. However, I,
Wanted to lock in profits
Think that the bond market could retest previous lows as the fed hikes rates in September and beyond
I will buy back into the bond market,
When/if the 10 year retests 3.5%. If rates crash all the way to 4% I’ll double my position. God forbid we get a death spiral to 4.5%, I’ll triple down
The Fed pauses on the rate hikes and/or reverses. At that point I’ll put on a position regardless of where rates are trading
I think it’s unlikely the 10 year ever reaches 4% and incredibly unlikely we ever hit 4.5%. Financial Armageddon, etc. The US government cannot afford to finance itself at higher rates, and no matter what the hell inflation is doing I think the Fed will step in if we stay too high for too long.
Will post a new update when I put on another bond trade. Am open to the possibility that selling was stupid and IEF rips 15% higher before the leaves change color. Will be watching the bond market closely.