A while back, I recommended a short position (or avoid) on the 20+ Year Treasury Bond ETF (NASDAQ:TLT). To play this, I took a position in TBT (the inverse ETF for long-dated treasury bonds).
This trade has been a winner, but it’s overextended short-term. I turned bearish on treasuries in July with the TLT up near 140. But to be fair, this treasury bonds decline has dropped further than I expected – price is now down in the low 120’s.
And considering the very sharp nature of the recent decline, the long-dated treasury bonds ETF (TLT) is now extremely oversold and this should lead to a decent bounce soon. Sentiment on the 30-year bond is almost at an extreme pessimistic level while Commitment of Traders (COT) data on both the 10- and 30-year are showing that the smart money commercials are increasing their net futures position.
Like many asset classes since the election, price just went way too far, either up or down. It’s likely time for some mean reversion. I’ll be looking at TLT instead of TBT, QQQ instead of IWM, Metals instead of Financials, etc.
20+ Year Treasury Bond ETF Chart (TLT)
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