Biggest Interest Rate Surge
Friday saw the biggest one day interest rate surge- for example
I hope to benefit from what I consider the top mainstream financial illusion: the
Fed is in charge and will prevent any but a moderate increase in interest rates by year end 2022- such as 1% (short term rates go from .1% to 1.1%; 10 Year Treasuries go from 1.9% to 2.9%…etc…). By contrast I anticipate the key driver of much higher interest rates will be the utter desperation of the Treasury to successfully auction the enormous supply of government paper to raise the cash necessary to fund this years government deficit AND to find the still more enormous amount of cash to pay off the maturing portion of the $30T Federal debt in an environment of 7% inflation. Note that faced with similar inflation in 1981, the 10 Year T Bond yield peaked at over 15%!
I continue to hold my position short the 30 Year T-Bond and all of my puts on the June 2022 Eurodollar. If I were taking new positions I would go cheap and buy the June 2022 98.25 puts selling for (before commission) $44. Should the contract fall to 97.25 by June it would be worth $2500. I continue to assume that such massive (over 50 to 1) gains are only possible because algorhythms rather than experienced human traders/market makers continue in charge (so far!)
Big Bob the Bond Bear