With yields falling the principal on my position in 30-year treasuries has appreciated about 6% since I purchased them in April and May. With this in mind I re-visit the position and plan an exit strategy.
Basically, I'm looking for one of three things to happen:
(1) U.S. economy slows, deflation takes root and equity markets crash, similar to 2008, and thus I would look to exit at a yield below 3%
(2) QE3 is announced, prompting me to likely sell the position unless QE3 involves greater purchases of long bonds, in which case I would have to conduct further analysis on its potential impact.
(3) Crisis over-seas, either in Europe, China or Japan, that causes yields on treasuries to slide. Again, I would be looking for a yield below 3% for an exit.
On the other side, if the U.S. economy began to show signs of unexpected strength then a yield around 4.3%-4.5% would cause me to sell.
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