jahowle

Short Treasuries? Never A Better Time

An investor can take some of the risk out of being short by taking a spread trade with munis and treasuries. You could buy PZA which is a muni ETF with about the same duration as TBT. So you could be long TBT (which is a short position in the long Treasury) and long PZA. Keep in mind that TBT is a double short so you would need to buy twice as much of PZA on a dollar basis. Now you would be long munis and short Treasuries with a positive carry since there is not interest to pay on the TBT and PZA pays about a 4.50% tax exempt dividend. Then you sit back and wait for the spread (which is at levels far above anything I have seen) collapse.