Just over one month ago we made the case that perhaps the best short since the heyday of the subprime mortgage debacle may be on the horizon. Our December 5 story identifying the biggest trade since the subprime short pointed out some inescapable facts about the longest rally ever in Treasury bonds.
The Treasury market has rallied for almost 30 years. Yields have ranged from Paul Volcker highs of more than 16% on the long bond and Fed funds at 21.5% to lows of 2.45% on the long bond and .18 basis points on Fed funds back in July of this year. Selling off back to the 16% level is all but impossible, but a move back up to a 4%, 5%, 6% or even 7% yield in Treasury notes and bonds is not out of the question. Again, the vexing question is when?
We asked when a month ago…
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