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Buy Bonds when the Fed buys Bonds

December 13, 2010

Last week I stated that the madhedgefund trader was an excellent fade in the bond market, and today is the day to prove it.

Time to go long the entire Treasury Curve from 5 years out, or buy 10s, sell 2s if that is your preference.

With the fed starting to schedule gigantic treasury purchases, I just do not see how this market falls all that much.  Are people going to sell $100bn of treasuries in the next 40 days at these prices?  I suspect not.

Pay particular attention to the light holiday schedule:  “Only”  $44.5bn of treasuries to be purchased during the lightest trading days of the year.    $10-$14 billion to be purchased on the Tuesday and Wednesday of the slowest week of the year.  Wow.

Go long Treasuries today or tomorrow am.

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