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‘The Biggest Flow Story Right Now’
Earlier this week, I highlighted ongoing inflows to the largest Treasury ETF amid more rates volatility and more losses for bond longs.
That product (the Treasury ETF) has become a go-to for duration dip-buyers who, with bonds deeply oversold, see what they believe is an unprecedented opportunity.
Recessions do happen eventually, the Fed is either done or almost done hiking and if ever there were a dip-buying opportunity worth engaging, surely a 50% drawdown in a Treasury ETF tied to the worst
I’ve allocated capital to IG bonds. But there’s a few things that keep bothering me. First, in 1980-81 TBills reached a yield over 16% before the Volker era. Second we have a Congress dominated by a religious cult obsessed with the end of the world who believe they are doing God’s work, and would have the US join the league of autocracies. A default might be inevitable.
I hope I’m wrong, but this Trump era has tested my dwindling optimism. The billionaires cheerleading this with their political giving may feel immune at this point, but Kings are notoriously rough on the nobles as well as the serfs. Just ask Jack Ma and the 23 dead Russian oligarchs.
So, sure, add more duration… what can you do?