Note the two Treasury ETF charts above. We bought both for a sh0rt-term trade today as both the IEF and the TLT are scraping their 200-week moving averages. We bought more IEF than TLT in the event we are wrong.
Even if the ETf’s simply move sideways for a while, the trade will be worth it.
The IEF is the 7 – 10 Treasury Bond ETF, which is the belly of the Treasury curve. The IEF fell $7 from its $109 peak in late April early May to its current price of $102.
The TLT is a very tempting chart here from the long-side as the 2oo-week moving average is acting as good price support. The TLT could rally as much as $10 back to the blue line or the 50-week moving average before it stalls out.
To be clear, I do believe the 10-year Treasury will likely end the year near 3.90% – 4% before we could see a longer-term rally. Use $106.84 as a stop-loss for the TLT and $99.80 – $100 as a stop-loss for the IEF. Heavy volume through both those levels would necessitate a sale of the above ETF’s.
We are very much bullish US equities and bearish Treasuries and expect higher rates, but short-term trades are a good way to add value in balanced accounts.
We realized a 3.5% – 4% gain in the HYG by selling our long position this morning. We wrote about the HYG trade here, near the bottom of the write-up.
Trinity Asset management, Inc. by:
Brian Gilmartin, CFA
Portfolio manager