Tuesday, January 27, 2009

Long bond rally time!

I previously noted a good shorting opportunity in the long bond (tradable ETF proxy ticker TLT). I think we're due for a trend change and any shorts (I did not take this trade) should be covering now if they haven't already. To the charts, yo.

First, the TLT chart (5 minute short term chart):

Next, the short-term chart of the 10-year government bond yield, which is not truly the "long" bond (this title is a slang term for the 30-year bond):

Remember that U.S. government debt will hold up OK during a deflationary storm, particularly on the short end of the curve, due to a flight to perceived safety. Bonds are a risky long-term play in the event of a currency crisis and have such low yield that a CD may be just as good as a cash equivalent. I shouldn't have to tell you that I hold gold instead...

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