Friday, August 27, 2010

"Long Bond Lolitas"

Jesse's Café Américain: US Bond: Our Hearts Belong to Big Daddy:

As crowded trades go this flight to safety into the long end of the curve and the 30 Year Bond, nicknamed Big Daddy by the bond traders, is about as jammed up as it gets.

The crowded trade was trying to short Treasurys six or nine months ago. Much of the recent move has simply been short covering by all those idiots. (I do not use the word loosely around here, but there is no other word for those people than idiots.)

For this move the short covering is about over. The next phase will be a driven by speculative longs. A short covering climax usually entails a sharp retracement, obviously, but I'm not sure if we're quite at that point yet.

Treasurys = HOLD (no change)