Bond Market Play on Sovereign Debt Bubble

Featuring Mark B. Spiegel

Mark Spiegel, Managing Member of Stanphyl Capital Management, outlines a long term short position based on what he thinks is the biggest bubble in the world at the moment, European and Japanese sovereign debt.

Published on
25 April, 2017
Credit Market, Europe, Trading
4 minutes
Asset class
Bonds/Rates/Credit, Equities


  • BA

    Blair A.

    28 7 2017 01:28

    0       0

    Greetings RTV subscribers. Welcome to your first trade recommendation. Today allow us to introduce you to a cute trade shorting the BOJ and ECB. Its known as The WidowMaker. Why you ask? First a moment of silence for all the Japanese widows who lost husbands shorting BOJ treasuries years ago. Second, lets all lock our windows.........

  • TW

    Thomas W.

    29 4 2017 09:55

    1       0

    Isn't the "max 5% downside" call a bit too sanguine? With an average maturity of 9 years I am not sure I'd sleep well. Euro Bund Sep 172 calls have a delta of .07, I agree that it's a long shot but we've seen stranger things happen in QE land.

  • MA

    MarketStudent A.

    27 4 2017 04:44

    2       0

    Like the series. The summary is missing to mention that the idea is to "SHORT" BNDX

  • CT

    Christopher T.

    26 4 2017 22:06

    1       0

    You could also short BWX or go long euro banks.

  • JH

    John H.

    26 4 2017 21:51

    0       0

    Cheaper to short with futures, as some have pointed out. Also, before shorting this, I'd want to know what the breakdown is, esp. how much is Northern European which have euro-zone breakup re-denomination risk.

  • TM

    Todd M.

    26 4 2017 13:57

    0       0

    Nicely focused thinking and reasoning here. Much better than the longer Tesla interview.Good focus, clarity and great editing!

  • AL

    Alfonso L.

    26 4 2017 04:00

    15       0

    I like the trade, but I'm not sold on the math here.

    The problem is that I'm losing .75% for the short, and then when I look at it on IB, they are charging me 2.53% to borrow it. I believe I get credit for the sale, so that's saving me a few dollars on my margin because I get the use the cash, but pay the borrow, but seems to me like I'm going to be going backwards at about 2.5% here annually. Yes, this might have a positive value to be short here because the debt is clearly inflated, but I'm paying a near certain 2.5%.

    You won't catch me long on this trade, and I would love to do it for a .5% or perhaps even .75% fee because I'm getting use of the money, but at 2.5% it's just a bit too rich for my blood.

    That said, I'm the (wizard) who pays 100% rates to borrow garbage stocks and short them. This just isn't a garbage stock -- it's a government run ponzi bubble and as we've seen with Japan those can go on for a very long time.

    Bet with the house is generally the right choice. Japan has a lot of debt -- they are going to keep rates low. The EU, I'm in agreement -- those rates are going to rise.

  • SD

    Stephen D.

    26 4 2017 02:30

    1       0

    The asset class is definitely vulnerable for a massive sell off. It's almost inevitable. But paying 2X the yield for the borrow is a bit offputting. Conversely can I really triple my yield by buying and borrowing this animal or is that just the investment banks who can do that?

  • MA

    Michael A.

    25 4 2017 21:38

    7       3

    I'm always wary (even though this is Real Vision) when people openly discuss trades like this. Of course, he put together a great case, but if there's anything i've learnt in my time investing, it's to do your own research. As the old adage goes: "Markets can stay irrational, longer than you can stay solvent"

  • MZ

    M Z.

    25 4 2017 21:30

    3       0

    Question please - "short BNDX" - is there a inverse ETF to accomplish this for less sophisticated folks out here in RVTVland? Thanks for any answers...

  • PT

    Pamela T.

    25 4 2017 17:02

    2       0

    Love this series. Succinct and actionable! Real Vision is the real deal!! Thank you!

  • RM

    Roberto M.

    25 4 2017 13:58

    2       0

    what about japan?

  • TM

    The-First-James M.

    25 4 2017 13:56

    1       0

    Beautiful case. Thanks.

  • TW

    Tom W.

    25 4 2017 12:57

    1       0