It seems like just weeks ago the financial media was looking for the coming drop in fed funds rate by the Fed. Real Estate was dropping and the economy was slowing. This time last year, inflation was on the rise and interest rates were going up. I like to use the financial media as a contra indicator on bonds.
Last week, I cut my short bond position in half. With 10-year treasury yields at 5.20% I have decided to keep it that way. My half position says I am playing for the breakout, but I don't see the point of trying to play a breakout in interest rates (bonds) with my full position right now. I still think it's more likely that in a month or so of weak housing data and the general summer malaise on commodity prices that the news media will be talking disinflation, economic slowdown and rate cuts all over again. The yield curve will again be inverted and I will reestablish my short bond positions.
Don't have a futures account? Good. You probably shouldn't be playing a leveraged instrument like that anyway. I've been using this opportunity to pick up some Treasury Inflation Protected Bonds trading near lows. The easiest instrument is the Exchange Traded Fund TIP. (TIP – $97.65). It's got a fat yield of 5.5% that goes up with inflation.
Disclosure: I am short both 10 year note futures (ZNU7) and long bond futures (ZBU7). I have also been buying munibonds again. I own TIP in my account. I also put some in my mother's IRA.
Don't try this at home disclaimer: Bond Futures may be for me but they are probably not for you. Futures are highly leveraged and you can lose way more than your entire investment in futures. If you play too much in options, you can even lose your home and everything you own. Now who would that be good for?