Bonds have hit very low levels recently, they took a beating. This is an argument for the "dippies" to squeeze the shorts, and run the price up or at least prevent the bonds from bombing. With recent the bad loan situations taking a toll on Japan's bond market, I think there'll be more Japanese money entering the North American bond market.
A $4 drop would be nice for puts, but how realistic is that? To tell you the truth, if we get only a 1/4 point hike, you've got to have a lot of money invested on the puts on bonds, otherwise I'm sure buying puts on stock indices would provide more bang for the buck, but then again the premiums are so much more expensive because of the volatility; so maybe buying puts on the bondos would be better.
I don't thinkg 1/2 a point by May is reasonable. Maybe a 1/4 in May, and 1/4 at the next FOMC meeting, and then I expect the Canadians central bank to follow. Perhaps this might already have been factored into bond prices, if not, we would be wise in buying puts on the long bond. |
