The recent round of quantitative easing will fail to keep bond prices high with yields low so we will continue to short the long term Treasury bond, seeing virtually no opportunity in bonds.
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Long-term Treasury bond interest rates are at about 4.4 percent, which reflects the belief that inflation will remain tame for an extended period of time.
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The Federal Reserve completed its daily purchase of U.S. long-term Treasury bonds Monday, sending Treasury bond prices up and yields down from the morning's levels.
In the bond market, investors dumped long-term Treasury debt, driving yields higher.
When the Federal Reserve Open Market Committee met in June, more bond purchases to push down long-term Treasury and mortgage rates were already on the table.
If you are worried about the direction of interest rates, an alternative to iShares Barclays 7-10 Year Treasury ( IEF) would be the SPDR Barclays Capital Intermediate Term Corporate Bond ETF ( ITR), or something similar to it.
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To profit from a housing-induced drop in short-term rates, buy the iShares Lehman 1-3 Year Treasury Bond Fund (80, SHY) or its call option.
Each year, I analyze the primary drivers of asset class long-term returns including risk as measured by implied volatility, expected earnings growth based on GDP estimates and foreign business expansion, market implied inflation based on the spread between long-term Treasury Bonds and TIPS, and current cash payouts from interest and dividends on bond and stock indexes.
At the time it began to sink, unable to meet margin calls, Long-Term Capital was, for example, long large amounts of the 29-year Treasury bond and short equally large amounts of the 30-year Treasury.
Short term bond yields increased slightly to 3.64% for the benchmark 10-year Treasury, while the 30-year bond yields fell to 4.68%.
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