Thursday, January 14, 2010

Bookkeeping: Re-establishing Decent Sized Short on iShares Barclays 20+ Year Treasury Bond (TLT)

We had extremely fortunate timing on Monday's cover of iShares Barclays 20+ Year Treasury Bond (TLT) as the $88.90 price seems to be almost the exact bottom this week. 

I am going to cover here, and see if there can be an oversold bounce in the next week to re-engage.

This is in no way a 'fast money' trade, but after covering Monday I placed a limit order to reshort at $90.40 which just hit.  Very content with the execution on this one.  Looks like there was some sort of spike on today's bond auction:

The latest auction of 30-year Bonds produced a yield of 4.64% and a bid-to-cover ratio of 2.68, which is above the 10-auction average of 2.41. Indirect bidding came in at 40.7%, which is a bit below the 10-auction average of 42.6%. The results have helped Treasuries extend their gains, such that the 30-year Bond is now up 42 ticks; the Bond's yield is at 4.63%. Meanwhile, the benchmark 10-year Note is up 19 ticks, putting the Note's yield at 3.72%.

I am hoping this ETF rallies north of $92, so I can short more at a better long term price but we were able to cover at an extreme low and get back our position with a 1.75% better price.  For a relatively slow moving object like a bond ETF that is a very good swing for 3 day's work.   For now we simply did a 1.2% allocation, and hope to lose money on this first tranche so can build up the position at higher prices in the intermediate term.  The ETF seems to have some decent support around $89.00.  If not, at least we have some skin in the game if the ETF falters again soon.

Short iShares Barclays 20+ Year Treasury Bond in fund; no personal position

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