Comments on: Long TLT, short JNK

By: Buying Gold

Buying Gold — Wed, 23 Nov 2011 15:29:03 +0000

Buying Gold…

[...]Long TLT, short JNK – The Sovereign Speculator[...]…

By: Mike

Mike — Sat, 09 Jan 2010 10:34:52 +0000

The idea is the spread – it doesn’t matter if both go up, if T-bonds/notes go up more.

But check your premise – corporates crashed in 08 as Treasuries rallied.

By: CP

CP — Sat, 09 Jan 2010 06:20:39 +0000

Mike,

Some WS firms are *still* touting a long-risk, short-sovereigns trade, i.e. buying securities of TBTF firms and selling government debt.

Really? That was a great trade in Mar 09, but now it is the height of foolishness.

What happens to that trade if Hank Paulson and Tim Geithner are clapped in irons and the bailouts are rescinded as a criminal conspiracy to loot the Treasury?

By: CP

CP — Sat, 09 Jan 2010 06:12:08 +0000

Your trade comes with a headwind though, because all debt is priced off of Treasuries, and if Treasuries rally then that is bullish for JNK as well.

I agree with your premise, though, and suggest shorting equities and buying Treasuries.

By: Mike

Mike — Fri, 08 Jan 2010 17:38:06 +0000

….using mid-duration Treasuries, I’d be inclined to go heavier on them than JNK.

By: Mike

Mike — Fri, 08 Jan 2010 17:31:44 +0000

IEF would be the ETF proxy for 7-10 year Treasuries.

By: Mike

Mike — Fri, 08 Jan 2010 17:26:54 +0000

Sure, from a pure spread perspective, it would make more sense to use 7-10 year T-notes.

I’m warming to the 30-year though.

By: AudioTactics

AudioTactics — Fri, 08 Jan 2010 17:15:09 +0000

Does it make sense to put this trade on using TLT and JNK from a duration perspective?

Is that how you entered this trade and did you do it in a 1 for 1 ratio?