Wednesday, March 24, 2010

Bookkeeping: Covering Most of iShares Barclays 20+ Year Treasury Bond (TLT)

I need to start paying more attention to my position in iShares Barclays 20+ Year Treasury Bond (TLT).  Since it does not move much from day to day, I tend to sort of have it in a corner and not do much with it - but today's movement is large enough for me to notice (still small relative to your average stock however).  Apparently there was a poor 5 year Treasury auction... could simply be an outlier event but if the US starts having more troubles (i.e. needing to pay higher rates) to fund its debt - which WILL happen at SOME point - this whole "nothing is wrong in the world since everything is backstopped by the Fed and government" ethos will begin to show cracks.   One day this instrument will cease to be range bound and begin falling like a rock - the panic that follows should be interesting.

I've had this position on for a 1.5 years and I plan on having it on for 5-10 years or whatever it takes, as the US continues to drive itself off the cliff spending like a drunken sailor, with no regret.  But like I often say, it won't matter until it matters - thus far, the mini US (UK) has taken far more of the brunt in currency and to a lesser degree bond market.  The US will be the last to be hit due to its reputation.  Ironically any UK blowup will help the US in the nearer term as the "safety trade" will be back on.  The idea of a country acting so irresponsible as 'safety' is laughable but that's the market's perceptions and it will take many years to change it.

For today, I am going to cover almost the entire position (I only have a 1% allocation) near $89.50 and try to get my short back in the $91s.  I will need to make the position size larger in the future to have more effect on the portfolio.

If you are new(er) to the website and want to understand the thesis of this trade please review:  [Nov 21, 2008: Bookkeeping - Initiating Ultrashort Lehman 20+ Year Treasury (TBT)]

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

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