Experts

iShares Barclays 20+ Yr Treas.Bond (ETF) (TLT): Bet Against the Experts

The usual rules of trading bonds are not working. Trade the thesis that everyone is wrong!

Bond prices have been more resilient than most estimates. The consensus was that in a tightening rate cycle from the Federal Reserve, treasury prices should fall. But that has not happened as evidenced by the strength of the iShares Barclays 20+ Yr Treas.Bond (ETF) (NASDAQ:TLT).

There is so much global interference by all central banks and especially Europe that the usual impact on treasury prices is not happening. Instead, we are trading inside of predictable ranges. Back in March, I shared a winning bullish TLT trade that really marked the start of a 10% rally with more upside potential still possible.

Today, I want to essentially rinse and repeat what I did back then. But since I am realistic with my expectations I will not be chasing prices higher. Rather, I will create income out of thin air betting that the TLT proven support will continue to hold through 2017.


Click to Enlarge Fundamentally, the TLT should continue to benefit from upside pressure from the actions of central banks outside of the U.S., especially the ECB. Global investors who seek bonds are forced into the U.S. Treasuries for better returns or to avoid the ridiculous situations of negative rates.

I have to recognize that my trade would be vulnerable to Draghi rhetoric. So far he has been posturing for tapering their QE efforts in Europe but his actions are contradictory to that notion.

But he is unpredictable and if he suddenly announces that the easy money is about to end in Europe then there will likely be money chasing that market instead of the TLT. Until then — T.I.N.A. That is, “there is no alternative” remains in effect, thereby propping up the TLT.

I have to recognize that my trade would be vulnerable to Draghi rhetoric. So far he has been posturing for tapering their QE efforts in Europe but his actions are contradictory to that notion.

But he is unpredictable and if he suddenly announces that the easy money is about to end in Europe then there will likely be money chasing that market instead of the TLT. Until then — T.I.N.A. That is, “there is no alternative” remains in effect thereby propping up the TLT.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/09/ishares-barclays-20-yr-treas-bond-etf-tlt-bet-against-the-experts/.

©2017 InvestorPlace Media, LLC

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