A former trading partner used to say that bonds are the hardest and most complex instrument to trade. I have to say that bonds aren`t really my field of expertise but my core concept in trading bonds is, "if the economy is weakening, buy treasuries and if the economy is strengthening, short treasuries". I keep things simple with such a basic concept. But in my view it works a lot better than ultra complex trading methods.
Here`s a good excerpt from David Rosenberg on bond yields:
“There is a 90 percent correlation between the Fed funds rate and yields further out on the Treasury curve. So getting a handle on what is going on in Ben Bernanke’s brain is the key toward forecasting the bond market. This is where most economists and strategists get it wrong when they focus on backward looking indicators like the inflation rate, fiscal deficits or the US dollar, for that matter. The primary reason why bonds have rallied in the past three months is because the futures market has radically cut its expectation for any Fed tightening in the next six to nine months” - David Rosenberg, in The PragCap
Tickers: ProShares UltraShort 20+ Year Trea (ETF) (TBT) iShares Barclays 20+ Yr Treas.Bond (ETF) (TLT) iShares Lehman 7-10 Yr Treas. Bond (ETF) (IEF)
