Going short on bonds

Hi there,
As many of you I have my core strategy covered with the VT and part VWRL (as left over from pre-IB times) as Satellit Investments I have some stocks, crypto and some left overs of P2P (lend.ch). From time to time I did some fun trading with mini futures and KO-warrants.

With the current market I would like to do some gambling again to benefit from the downward trend. While shorting a specific stock or index is always risky I feel really confident that bonds should go down with the increase of yields from FED. Does anybody know how to best use this situation to benefit from falling bond prices? I have checked out a short ETF SHV but there is no gain YTD which I do not really understand.

Any suggestions would be highly appreciated.

Markets already price in notable rate hikes in bond prices. Eg in CH 2-year swap rates (1%) as of today price an immediate rate hike of 1.7% (SARON = -0.7%). That’s enormous, you would only benefit if rates increase by even more than the market expects! Just look around the other countries and its even more extreme: Italy 10-year rate already stands above 4%. Up by more than 3% in 1 year so that a 10-year duration bond already (!) lost ~30%.

The ETF you mention seems to purchase short maturity bonds, rather than being short in bonds. Search for inverse bond ETF instead or even much more risky short futures if you really wish. It’s pure speculation though and you can equally lose large amounts especially with futures (your entire equity may be lost!)… Personally would not do this at all.

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Thanks for your response. It sounds rather complicated indeed. I guess there is not sufficient value for me to dig in depth into this topic. I’m fine if I can do a small ride on the roller coaster with some mini futures (maybe on Nasdaq it’s still below all the EMA trend lines). I just like the idea of being able to have some gains even with a falling market. In an ideal world I would get some profit from the mini futures and investment that money into VT once it’s in a lower level. However, most likely what will happens is that I get knocked out and will buy VT afterwards with less money on a higher price :joy::joy::joy:

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Hi, where can you find current Swiss swap rates?

Hi there!

I am doing since a few weeks…

You can buy some INVERSE ETF on IB quoted in €
DXSV for a mix of EU BONDS
BTPS x2 Italy
DSB x2 Germany
DSUS x2 US

I don’t follow the lazy line and invested 30% of my assets with IB margin. I can’t image rates not going up for the next months.

The most stupid is the margins rate is at 1.5% and Germany borrow for 10Y at 2% currently

What’s stupid about that? It’s completely different duration no?

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Well that’s just insane that an individual could borrow at lower rate than the best rated country on the zone. Currently Italy around 4%

As I mentioned, that’s entirely different (short term vs. 10y rate).

See the AAA yield curve: Euro area yield curves (Germany is AAA). It’s negative until 8 months.

If you weren’t trying to make a misleading point on purpose, I’d recommend following a few financial classes, because I’m far from an expert but that sounds pretty basic (or maybe you’re just having fun with play money).

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Be aware that your margin rate at IB is not fixed for the duration of your bet. It will go up when the rates rise. Like it did e.g. for USD from 1.58% to 2.33% in the last ~6 months.

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Of course I am totally aware that the borrowing rate will increase soon on IB!

I was just pointing out that ECB is really slow to increase its rate…
Maybe it’s basic and gambling, we’ll talk about this position in a few months.

Other participants can’t either. It’s not enough for rates to go up, they need to do so more than expected by other market participants. They’ve been wrong a lot, lately, but chances are they’ll start being right before rates reach their actual top.

I’m not saying not to do it but rather to stay tuned to the market sentiment and also stay very humble. People’s beliefs and psychology is very hard to catch and the composition of the market changes with time.

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