Today I sold all of my position in 30-year treasuries. The main reason for selling is a growing concern that central banks may increase their efforts to stimulate the world economy. Last week illustrated what likely happens to yields on treasuries if central bankers become more active. Longer-term yields increased, dropping prices.
I continue to believe that if left alone, yields on the 30-year treasury could dip to 2.5%. However, if the ECB or the Fed announce a major effort involving the printing of money under another QE program to stimulate growth the yield on the 30-year could easily move back above 4%, in my opinion. I believe the risk is simply too great over the next few weeks of a major move downward in treasury prices.
While I gave back a little of my profit this quarter on the position, I closed out the position up in excess of 25% from when I purchased the bonds in April and May.
My plan is to watch what happens with treasuries over the next few weeks and potentially re-enter a position in longer term bonds or invest in the ETF TBT, which moves inversely to treasury prices.
No comments:
Post a Comment