Bonds r screwed

Starting a new thread after research from my gold thread led me to the conclusion bonds r fucked.

First big shoutout to @TheHouse for teaching me about the move index an index which measures fear in the bond market just like the vix.

As you can see it’s spiking like crazy and I think I know why. The answer is the feds rate hike decision and inflation. The feds hands are tied their only choices are raise interest rates like crazy or late inflation run rampant. Either way bonds are screwed both are bearish for bonds.

Here’s an investapedia article explaining it but look into it you’ll see interest rates and inflation are both bearish for bonds.

My prediction is either way the fed comes out bonds will suffer either by interest rate hikes or inflation fears.

Different ways to play this are lqd or hyg puts those are both cooperates bonds. You can also play ief which tracks treasury bonds. Or if your a futures trader you can take znm2 puts.

Lqd flow

Hyg flow

I’m classifying this as a swing trade because I think this will take some time to play out I am currently holding 2 znm2 puts with may expiration.


Thanks for starting this thread, @KneifKneif. @TheHouse and anyone else who understands bonds well, would love to hear your thoughts on this too.

Basically, are the spreads getting to a point where we should be worried, or is this the market just frontrunning the expected 0.25%-0.5% Fed hike in 2 weeks?

Here’s the corporate bond spread (blue) and the high yield bond spread (orange) - both creeping up toward Dec 2018 levels.

And here are both with SPY:

I suppose we’ll know for sure on 3/16 on whether this is a re-pricing of risk or just a front-running of the rate increase, but would be helpful to be prepared for either scenario, either way.


Yeah I think there is more coming into play then just the rate hike the market has had time to price in rate hikes and it has bonds have been coming down steadily for a while but the fear is only now spiking. I think it’s the uncertainty around how the Ukraine will impact fomc. Most commodities and the s&p started reacting strongly on the 11th the same time move index started coming up. Worries about increasing rate hikes due to greater inflation concern are starting to come into peoples minds.

Looking beyond that even if they don’t aggressively raise rates I feel that people will then get worried about inflation getting out of hand, is my speculation what we will see after fomc if they don’t do a 50 bps hike.

Although the market has already priced-in some of the interest rates, I still believe there’s still plenty of room to go.

There’s no signs of inflation stopping and even if we are close to the peak, interest rates are still going to continue to rise as per the Fed. I believe bonds will follow in a bearish direction for a while.

I’m personally thinking of buying calls on TBF unless there’s an inverse ETF with more liquidity out there.

I believe there was a small de pricing in of interest rates at the beginning of the conflict as people thought maybe this would delay rate hikes but was latter priced back in after Powell said it wouldn’t affect tightening. I am still bearish for a while but it may be possible we see a small relief rally after fed officially announces rate hikes. For me personally I prefer the 10 year treasury yield I find it to be a little more volatile then 20 year.

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Bonds just came below the bottom they had before the Ukraine invasion noise took over, safe haven demand and potential for fed to undo his rate hike took over

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Fomc today and some news about path of rate hikes to come. Here’s what happened after fed talks in February.

As you can see bonds got a small rally following feds “not screwing the market with huge rate hikes” before selling off a bit then getting a Ukraine war pump.

This may indicate that people were betting on sharper rate hikes as when they didn’t come they covered shorts/started buying.

Bond sell off like crazy the last couple days, this may an indicator that people are betting on hawkish comments and if that doesn’t come we may see another small rally.

I have already closed all bond out positions as I was already green and don’t want to risk holding through the event as it may be possible fed could screw the play.


Re taking my bond short position slowly over the course of the day and over night. I feel like the over hawkish bets and shorts taking profits has faded out based on the deep top wick yesterday and we are back to bear mode.

Did some research on the yield curve and what people look for so I’ll give a crash course from what I’ve learned.

A normal bond yield curve looks like this

Basically as maturity’s get longer yields should be higher to offset the risk of holding for so long. When bonds look like this the economy is seen as healthy and normal.

So what happens as the economy gets weaker the yield gets flatter as people now expect high yields for short term bonds. Flat yield curves as watched carefully to see if the curve will go back to normal or become inverted.

An inverted curve happens when short term yields start out doing long term yields this is seen as a sign of a recession about to happen.

News articles are starting to talk now about the curve flatting out which means this is starting to get more attention now. Based on the flattening of the yield curve and what I posted in the original text I think short bonds are still a good play and will pick up some t bond future puts and some more lqd puts.


Thanks @macromicrodick for posting this article in tf

Plus another similar article. If you’ve ever read the intelligent investors there’s a whole chapter where an old guy yells you about how your port should be split between bonds and stocks depending on the market. Obviously most of us aren’t rich enough to own enough bonds to make a reasonable return and that’s exactly what most of retail will do dump bonds for stocks.

The appeal is waining from banks to own bonds which is very bearish for price. If stocks where to take of in the wind here it would definitely lower the appeal of bonds.

Inflation is around 7% and the current yields are around 2% making the average return on a bond -5%


Rolled some itm strikes to otm to secure profits as my futures puts crossed 80% and 90% I am still bearish until at least may opex but I wanted to reinvest those profits elsewhere this comes at the cost of lowering my delta hopefully don’t regret it.

Added some paper trades today to get a better scope of how the play is going and compare rolling for profits to holding through.

Ief, lqd, znm, zfm

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I got shaken out by the last Fed meeting causing a lot of volatility in the bonds market, but my theory seems to still be in tact. The underlying on these bond ETFs I’m watching seem to keep moving in their current trajectory. With a pullback on TBF today, I’m thinking it might be a great entry for some May calls.

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Another leg down today, these moves are sharp and violent downwards lately.

Jpows speech had an additional rate hikes mentioned that needed pricing in that got a little delay from possible safe haven demand increase from Russia re appearing in the news.

Goldman Sachs has now upgraded its treasury yield forecast. One thing to note is on the gold play as soon as Goldman Sachs raised its outlook it came back down 100 points so watching out for that.

They are predicted 10 years to 2.7% and 2 years to 2.9%

We are currently at 2.48% for 10 years and 2.28% on 2 years.

This still leaves some downside on the table should these predictions prove to be true.

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Was busy with work yesterday but I opened a $19c for May today on TBF. I was able to get a glimpse of a headline today that said back to back .50% hikes are looking to become more of a necessity.

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i’m looking at these until early May. going to just track them for the next couple of weeks. they’re leveraged inverse bond ETFs.

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Wow I didn’t know there was so many I wish I knew about this one when I started this trade tyo.

Inverse leveraged these went up 6-8% in a week


Haven’t updated in a while as I took my last round of profits and took a well deserved break from shorting bonds. Saw some articles saying bonds are approaching real yields. Real yields is the bond yield after taking into account inflation as well. Bonds haven’t had real yields since the covid pandemic as prices pushed yields sank and inflation grew resulting in bonds not giving real returns.

So why did bond prices sore when they offered no real return? I believe bonds were supported by the federal reserve and carried them to all time high prices.

Now after the Bond sell off which supported the market we are now down to 10 years just shy of 3% and now with increasing rate hikes and quantitative tightening we have decreasing inflation bonds being sold by the fed and now finally bonds offer real return on investment after inflation.

What does this mean for stocks and commodities nothing good I’m afraid.

As you can see bonds are starting to get a bounce. What will happen is this will bring yields back down so I expect to see more selling then yields go positive again then buying. The thing to look out for is cpi to see if Qt is bringing down inflation if, if it is then bonds could start making higher highs and higher lows. If not then the sell of will continue until it does.

I’d be cautious of shorting bonds here the move has been sharp and very profitable if you played.

But one thing to note about this is every time bond futures go green commodity’s and stocks will likely go inversely red and that’s what I’m looking for these next couple weeks


Thanks for the update. I also sold my TBF call last week at near resistance (+77%). I believe we are just witnessing a temporary technical “bounce”, as the rest of the criteria for bonds to continue to fall are still in play. However, being this close to the next rate announcement, my plan is to simply observe how the bond market reacts and not get shaken out by volatility.

Once there’s a clear continuation of the trend, I’ll jump back in.


Yeah I expect another push downward as this round of buys will push the yield back down below negative.

We haven’t touched the 21 day moving average since march 9th looks like it’s making a push towards it could see a bounce back around there

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@KneifKneif I went back and read this thread from the start, and it’s such an eyeopener on a second read. You saw so much of this playing out starting two months ago and have been calling it to a T. Amazing job!!


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Small update since FOMC has now confirmed .50 rate hikes. My thesis appears to still be intact - the value of bonds will continue to go down as long as interest rates keep climbing. As you can see in the image below, TBF blasted past it’s $20 resistance and also inversely, AGG fell below it’s $102 support briefly today.

I’m now looking for a retracement/test of that $20 as support now and most likely enter on Monday (cause fuck theta) for a May 20 call. Even the cost of ITM strikes are at the same level as they were when I was playing this for the first time.

Rinse and repeat.

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