Reducing Short Bond Exposure a Bit

Yesterday and today I have reduced my short bond exposure a bit.  I did this mainly by closing (selling) deep in the money puts on ten-year bonds. 

I think bond yields are headed higher (bond prices lower) but I think we will be in a range for some time before that happens.  Now there is bad inflation data and the fed is about to raise short term rates again.  Once they raise short term rates, the call will go out that they've gone too far, some positive news for declining inflation will come out, longer bonds will rally, the curve will invert and I'll put my bond short back to its full force level. 

I leave 3/4 of my short position on because I still believe the risk of a breakout (up on rates - down on bonds) may still happen as treasury holders move into shorter term instruments.  I like being short the 30-year bonds now more than the 10 year.

Disclosure: Nothing in this blog is meant to be a recommendation to buy or sell.  I do not give investment advice.  Do your own research.  Do not rely on anything in this weblog to make investment decisions.  I do not log all my trades here. I only those that I think might be interesting. Consult your own investment professional before buying or selling any security.

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