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PhD Candidate in Economics at George Mason University. Received a Master's in Public Administration from George Washington University. Majored in economics and finance at Washington University in St. Louis. Previously worked as an Options Market Maker/Trader.
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Bubbles and Busts
  • Hedgies Become "Dumb Money" On Long Bond 0 comments
    Jun 8, 2012 8:58 AM

    Apparently hedge funds have recently become net buyers of the long bond:
    Since this is supposedly the "smart money", it may be surprising that yields (the inverse of price) have been moving like this (Source: Bloomberg):

    Seems the hedgies were net sellers throughout almost the entire move lower in yield (higher in price), only to reverse course just prior to the most recent price top. Over the past couple weeks I've suggested lightening up on the long bond as a 2.5% yield no longer offered a compelling risk/reward ratio. Is it possible the "smart money" has become the "dumb money"? If this trend continues, will it signal a final bottoming in yields for the 30-year bull market in bonds?

    Related posts:
    Fed Policy Drives Bond Yields Lower

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