As mentioned previously, the possibility that the Federal Reserve Bank would enter the treasury market to drive down rates and increase liquidity in the system was a strong possibility. IT HAPPENED!
Today, B. Bernanke, Federal Reserve Chairman, announced that the Fed would go on a spending spree, buying $300 billion on long term treasuries as well as purchasing mortgage backed securites.
Treasury securities rallied sharply. 10 year government rates fell below 2.5% and 30 year rates fell below 3.375%!
It's not a fair market! While we were positioned for this and recommended to be long in the interest rate instruments short term, the long term damage that the fed is doing will only drive the US into ashes.
Accompanying the bond move, the Dollar fell sharply against major currencies.
The basic investment premise put forth at the beginning of the year still holds true. While bonds look like they will continue to rally as the government is going to buy buy buy, look for opportunities to take positions in the TBT (Double Short long term bond ETF), currently at 44 (we entered into this initially at 37 so we are still not adding to our position here). But you should take a position in the Short Dollar Exchange Traded Fund (ETF) (Symbol UDN) currently 25.45.