29 June 2012

The 30-year Bond is still very much overvalued

The 30-year has been the destination of choice for flights to safety for a while.  Out of stocks into the bond.  That's done some damage to the yield curve which we can anticipate will be undone over the next few months if the Europeans get (and keep) their act(s) together.  The chart above shows what about $1M long US and $1M TY short would have done for you since 2006.  What caught my attention is that the spread has never been wider not even in '08-'09.  Too much fear, not enough greed.  Mean reversion can get pretty mean if you are on the wrong side.  These charts will look different next month.

You can plug in your own numbers and assumptions here.  http://futures.transmatch.com/

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