Monday, May 04, 2009
On March 18, the Federal Reserve announced it would buy $300 billion "longer dated" Treasury bonds.
This was the news the "long-bond bulls" had been waiting for. It meant the world's most powerful central bank was going to pump $300 billion into their market over the next six months...
The "long bond" is the nickname for the 30-year Treasury bond. It's the longest-dated debt the U.S. Treasury issues. Long-bond investors must have thought they were about to get rich...
But the market didn't oblige. There were too many long-bond short sellers...
The old advice for short sellers is, "Throw your rocks into the wet paper bags." Eventually, the bag will break. The long-bond market is a wet paper bag. It's making new five-month lows. This market is so weak, not even the Fed's printing press can hold it up.
If you own any long-dated Treasury bonds, sell them now. This market is in danger of imminent collapse. Look at this chart. The next major stop for this market is 112.5, the lows of 2008.
Crux note: Learn more about The 12% Letter and the unique "dividend capture" strategy here.
More posts on Treasury bonds:
The magic number you need for shorting U.S. government debt
Warren Buffett warns of massive investment bubble to pop