Bond Breakout

Published on
30 August, 2018
Topic
Trading, US Economy, Monetary policy
Duration
14 minutes
Asset class
Bonds/Rates/Credit, Options

Bond Breakout

Featuring Michael Purves

Michael Purves, chief global strategist at Weeden & Co., discusses why he’s bullish on long-dated Treasuries, despite Fed policy normalization. He explains how he is using options to bet on falling yields in this interview with Justine Underhill. Filmed on August 27, 2018.

Published on
30 August, 2018
Topic
Trading, US Economy, Monetary policy
Duration
14 minutes
Asset class
Bonds/Rates/Credit, Options
Rating
10
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Comments

  • SV

    Steven V.

    30 8 2018 16:50

    3       0

    Treasury yields will see new all-time lows during the next recession and are unlikely to ever return to normal. Forty years ago the Fed began to damage and fracture the mechanism which creates inflation, and it will likely break during the next recession. The problem for the Fed is they have no idea how inflation is actually created even though they are responsible for regulating it. Maybe helicopter money will generate inflation, but it if does, it won't for long. The inflation mechanism is severely damaged...

  • NG

    Nick G.

    30 8 2018 11:03

    14       0

    This so called "extreme positioning" is all in the eyes of the beholder and is being used to justify a particular narrative. Any bond pro knows it is utter rubbish and that you cannot deduce anything at all from it, apart that large leveraged funds have reduced their massive net long exposure in cash (probably from leveraged risk parity positions) by offsetting it in futures and/or that they are running massive hedged carry positions in USTs. Predictive capacity: zero.
    Does not mean the trade will not work. But if it works, it will have nothing to do with current positioning in the futures market, which is a small part of the overall bond market. As always, the bond market will react to the perceived future paths of economic growth and inflation. The rest is candyfloss. It is like saying the tail will wag the dog.
    Only thing you can be sure of is that when they do come to take the trade off, the basis cash/futures will go out a few points as they will need to find someone willing to sell them a lot of contracts. But that could happen tomorrow or anytime in next few years.

  • JS

    Jason S.

    30 8 2018 10:32

    0       0

    Nice...risky move going low now though heading into Fed meeting on 25-26 Sept. Might see yields lower into that date and then bounce on the rate hike. Maybe consider waiting to place trade or moving back timeline by a month or two. Oct 18' seems too early...would be Sept expiry.

  • rs

    rohan s.

    30 8 2018 10:09

    0       0

    Excellent interview, well laid out trade idea with great fundamental knowledge