The Deflation Trade: Betting on a NIRP Reversal

Published on
February 5th, 2020
27 minutes

The Deflation Trade: Betting on a NIRP Reversal

Investment Ideas ·
Featuring Peter Boockvar

Published on: February 5th, 2020 • Duration: 27 minutes

Peter Boockvar, chief investment officer of Bleakley Advisory Group, returns to Real Vision to explain why he is looking to short the Vanguard International Bond ETF (BNDX). Boockvar describes how most of BNDX’s constituent bonds offer yields that are either ultralow or negative and argues that shorting the fund trade could be a relatively safe hedge against a global hike in interest rates. Filmed on January 22, 2020, in New York.



  • DS
    Darlene S.
    13 May 2020 @ 03:37
    These videos are pretty old and not helpful, especially considering the current rapidly-unfolding crisis.
  • AC
    Andrew C.
    10 February 2020 @ 01:52
    When I first got in, it was really back in, I can't remember but I think it was around the time when the Fed was raising interest rates This really put me off the entire interview. He had a trade idea, and instead of preparing for this interview, we get "I can't remember". A proper review should have been demanded, Ed. It made me think the rest of the interview was just Peter's ramblings. Perhaps I missed something, but that's what I got from it. Disappointment If rates increase, what happens to European Banks? I was waiting for this, which is why I watched in entirety on 2x.
  • AB
    Amarildo B.
    9 February 2020 @ 21:00
    Hi it's going to be Rong on everything
  • JG
    James G.
    9 February 2020 @ 18:10
    I took Perers suggestion on Williams Company WMB. It gone up and down, but what a payday with it's dividend. It's been a great holding.
  • AT
    Andrea T.
    5 February 2020 @ 12:05
    Beautiful interview and rational arguments, but there is a difference between what CBs say and what they do. For example, they say they fight inflation, yet they print trillions of dollars out of thin air. They say that repos operations are not QE, yet they are. They may say that they want to avoid negative rates, yet there is no way for governments to not go bankrupt without negative interests on their non-serviceable debt. If rates will go up substantially, it will be *despite* CBs actions to suppress them. It will be because the system is collapsing.
    • AM
      Alonso M.
      5 February 2020 @ 17:47
      Order of events? Bund yields remain suppressed below zero --> Eurozone banks waive the white flag --> Eurozone banking system is recapitalized --> rates go up substantially.
    • NI
      Nate I.
      8 February 2020 @ 01:49
      That would have been my comment if you had not already posted it. The CBs will monetize the entire debt market if need be. This nonsense ends in one of two ways. 1) The people are finally so squeezed with the rising cost of living that social unrest and societal breakdown becomes unmanageable. 2) A currency crisis.
    • DS
      David S.
      8 February 2020 @ 15:48
      There is no way around a crisis at some point. The tax payer will have to bail out the governments, but hopefully no one else like 2008. DLS
  • JP
    John P.
    6 February 2020 @ 18:21
    If I could short the specific euro NIRPs and long TLT as a retail investor then I would, but BNDX has too many fx hedges and baskets of international bonds to short as a fund. I wish there was an ETF I can short that pays me.
  • TZ
    Tibor Z.
    5 February 2020 @ 18:20
    I really enjoy the conversations with Peter and I am sharing his views but unfortunately I couldn't make a buck on these ideas. Did I missed some interviews? :)
    • ns
      niall s.
      6 February 2020 @ 16:39
      I did very well on his HCP call now know as PEAK
  • VK
    Viresh K.
    5 February 2020 @ 22:02
    Pretty sure it’s FX hedged.... if so his whole video is basically pointless
  • JN
    Jack N.
    5 February 2020 @ 19:35
    If thesis holds wouldn’t a better way to play this be to buy euro and Japanese bank equities?
  • JB
    JENNA B.
    5 February 2020 @ 10:37
    oh dear - no mention that a negative yielding 10 year German bund hedged back to USD actually yields more than the 10 year US Treasury, FX hedging costs or benefits are the primary lens through which to understand global bond yields, Fascinating self confidence to pitch an idea like this without any mention or perhaps understanding of this factor.
    • JB
      James B.
      5 February 2020 @ 11:49
      How do you find fx hedge yields?
    • PM
      Philip M.
      5 February 2020 @ 12:15
      @jamesb FX would be hedged via FX forwards. Due to the high differential in short-term rates, the FX EUR/USD hedge would boost the yield a couple hundred BPS.
    • JF
      Jack F. | Real Vision
      5 February 2020 @ 13:08
      "...a negative yielding 10 year German bund hedged back to USD actually yields more than the 10 year US Treasury" -- for now!
    • JB
      JENNA B.
      5 February 2020 @ 13:25
      Jack F - yes it may only be for now e.g. if US cuts interest rates and ECB does not, the hedging benefit will erode for USD investors. My point was that it should be discussed as a part of this thesis of negative yielding bonds blowing up.
  • SM
    Stephan M.
    5 February 2020 @ 11:43
    The price cap that politicans in Berlin put on the rent is about socialistic price control. They blame the rich or the haves for high rents - not the EZB. The average person did not see the asset inflation in housing comes from the EZB.
  • SM
    Stephan M.
    5 February 2020 @ 11:05
    As a European I see a standstill in interest rates or even lower rates. Rising rates with a french EZB chief - this chance is very low. I go with D. Rosenberg that US treasury rates will possibly lowered one or two times in the next 12-18 months.
  • PV
    P V.
    5 February 2020 @ 10:07
    While respecting the thesis is hard to se how rates have any scope to increase, especially in Europe. The downside risk includes massive bank default and Italy's being forced out of the euro zone. I reckon such scenarios are too politically toxic in Ger/Fra/Ita and dobt the ECB will have get enough cover to increase rates unless we start to see 4-5% topline inflation...