Kevin, I love the trade, esp the psychology as outlined in your last article on breakevens. I still have to ask you, why not also have a steepener on breakevens? https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/bfm6407.jpg?itok=GuAu38dS. After all, isnt fading more your style? ;)
Ryan - I can 't disagree with you. My problem is that when it comes to inflation breakevens, I'm like Alex Gurevich. Alex's idea of trading the yield curve is deciding which part of the curve is he insanely long. He doesn't believe in shorting any part of the curve. :)
That's me with inflation breakevens. Hahahaha!
Seriously though - you bring up a good point. I am going to think about this some more.
But if I had to pick a part of the inflation curve to be long, it would be 30 years for sure!
your posts have made me realize that while I'm currently sitting on a load of puts in the 5-year due to their lower duration-adjusted IVs, I really need to move into the long end. May have to pay up for higher duration-adjusted IVs. The MOVE index has been super low lately, especially relative to VIX.
ya shorting the short-term part will reduce risk drastically of some kind of new short-term economic emergency. Doesnt have to be full duration-adjusted size. Just a little hahaha. I dont have a BB. U mind citing me the best longest-term TIPs to buy in YTM terms and telling me the duration? From there I can figure out how many ZBs to short. Secondly, how do you feel about being long TIPs at negative real yield? Maybe just be better to be heavier on the short? Any insight into why real yields are so negative, and where real yields may be headed? If I were to add to your position the risk-reducing effect of going short breakevens on the short-term end (2 yr) w/ the risk-increasing effect of going extra heavy on the short bond side, the result is that you are short large ZBs, hedged w/ long 30-year TIPs and short small (in duration-adjusted terms) 2-yr TIPs (and not long any nominal 2-yrs).
Kevin, I love the trade, esp the psychology as outlined in your last article on breakevens. I still have to ask you, why not also have a steepener on breakevens? https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/bfm6407.jpg?itok=GuAu38dS. After all, isnt fading more your style? ;)
Ryan - I can 't disagree with you. My problem is that when it comes to inflation breakevens, I'm like Alex Gurevich. Alex's idea of trading the yield curve is deciding which part of the curve is he insanely long. He doesn't believe in shorting any part of the curve. :)
That's me with inflation breakevens. Hahahaha!
Seriously though - you bring up a good point. I am going to think about this some more.
But if I had to pick a part of the inflation curve to be long, it would be 30 years for sure!
Have a great night!
Kev
your posts have made me realize that while I'm currently sitting on a load of puts in the 5-year due to their lower duration-adjusted IVs, I really need to move into the long end. May have to pay up for higher duration-adjusted IVs. The MOVE index has been super low lately, especially relative to VIX.
Fixed-income vol is dirt cheap. I should be doing it all through options. Your comment reminded me of this fact. Thanks!
ya shorting the short-term part will reduce risk drastically of some kind of new short-term economic emergency. Doesnt have to be full duration-adjusted size. Just a little hahaha. I dont have a BB. U mind citing me the best longest-term TIPs to buy in YTM terms and telling me the duration? From there I can figure out how many ZBs to short. Secondly, how do you feel about being long TIPs at negative real yield? Maybe just be better to be heavier on the short? Any insight into why real yields are so negative, and where real yields may be headed? If I were to add to your position the risk-reducing effect of going short breakevens on the short-term end (2 yr) w/ the risk-increasing effect of going extra heavy on the short bond side, the result is that you are short large ZBs, hedged w/ long 30-year TIPs and short small (in duration-adjusted terms) 2-yr TIPs (and not long any nominal 2-yrs).
Ryan - sorry for the late reply.
Here is a spreadsheet with the TIPS you requested.
https://1drv.ms/x/s!Av_wKZFdtnCKhqR93JMqVQRpEIqNYA?e=6FuHp2https://1drv.ms/x/s!Av_wKZFdtnCKhqR93JMqVQRpEIqNYA?e=6FuHp2
I'll get to the other parts of the question tomorrow, but I just wanted to get this to you.
Take care,
Kev