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Pastimes : The Philosophical Porch

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From: Rarebird	12/10/2006 4:06:38 PM
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Bond Market Fragments: Bond Market: Confirmation of a major bottom in long term interest rates has arrived. Bonds have topped in price, bottomed in yield. This means it is time (for me) to begin buying a reverse bond fund like RRPIX, on bond market rallies. What the fund manager does in RRPIX is sell 30 year bond futures short in order to get a positive return when interest rates advance. All I have to do is buy shares in the fund and I'm pooling my money with many other investors in selling the bond futures short. Of course, I pay the manager of the fund a fee for handling my money. Leverage in RRPIX is 125% Of course, I can do it myself by selling the March 2007 Bond Futures (ticker ZBH07). But, doing it myself for the long term means having to roll my positions every quarter. finance.yahoo.com The yield curve is at its ideal bottoming timeframe. The bottom line here is that long term interest rates are headed much higher over the next couple of decades. I expect the yield on the 30 year bond to easily rise over 10% during this time frame. Since this is a long term trend, my long term position will be built on interest rate dips. Since long term interest rates have formed a long term bottom, this is the short sale of the century.

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