We have updated our privacy policy and terms & conditions. Find out more here.
7
 

Playing The 30-Yr. Bond Against The 10-Yr. Note

By Nov 08, 2012 04:15PM GMT Add a Comment
 
AA
+
-
Treasuries And Securities
Treasuries And Securities

Let’s assume an inverse relationship continues to play out with Treasuries and the stock market. My feeling is that the stock market will stabilize in the coming weeks and while staying range bound, will trade higher in the preceding weeks. Not a bull market but a trade back near the levels seen in the Fall. That said, if securities move higher we should see Treasuries trade lower.


As it stands now both 30-yr. bonds and 10-yr. notes are near two-month highs. Could we trade to their July highs? While I see it as a possibility, it's not very likely. So the question is, how to structure a trade?

The 'NOB' Spread
I want to gain light bearish exposure with clients without trying to pick a top at current levels. Hence, a NOB spread. I will go with my bearish bias and short 30-yr bonds while at the same time going long 10-yr. notes 1:1. The idea is that 30-yr. bonds will move more and -- ideally -- we'll chose the correct direction: lower. This strategy accomplishes three things, it lowers your overall margin, it allows you to be flexible giving the option of legging out of the trade and, assuming we are wrong getting short 30-yr. bonds, our loses should be marginally offset with the 10-yr. note position. If this trade works and 30-yr. bonds in fact move lower we are looking for a net profit as the 10-yr. note leg will be a loss.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data .

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Add a Comment

 

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

EUR/USD
 
 
 
Are you sure you want to delete this chart?
 
 
 
Are you sure you want to delete this chart?
 
 
 

Successfully Reported

Thank you. This comment has been flagged for a moderator.
_touchLoadingMsg