Thursday, July 9, 2009

Rates, TBT Pop As 30-Year Auction Lags

US interest rates opened higher this morning after plummetting yesterday in response to a strong 10-year auction. We discussed TBT, the ProShares ultra short 20+ Treasury play as a great way to take advantage of this move.

Later, the 30-year auction results came in worse than the 10-year auction yesterday. Bid-to-cover for the $11 billion offering was 2.36. 67.88% of the bids were accepted at the high rate of 4.303. Thirty-year rates were trading at 4.32% around 1:25 cdt. TBT is up nearly $2 at 50.20 at this hour.

Expect the long-end rates to continue rising while the short-end will benefit from an expected flight-to-quality that should occur as the market continues to trend lower.

If you don't have the stomach for the fast-paced futures markets, TBT, which is traded like a stock, can provide you with a way to take advantage of rising rates. TBT's price moves inversely to the bond price rising 2% for every 1% that the bond price falls.

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