I relent on my bullish Treasury bond call which was based on the extreme negative sentiment readings. We owned a modest position in the TMF which was a positive bet on the long term US Treasury bond but after today’s ADP private non farm payroll numbers the past of least resistance is likely down for long term Treasuries, despite the extreme negative sentiment.
In place of the TMF we will be swapping into the TBT which will rise in price should long term Treasury prices fall. The TBT will also serve as a hedge to our relatively large closed end municipal bond positions. Since a rise in interest rates could hurt muni prices and hopefully some of that loss could be made up in the TBT.
Long TMF and TBT