A small position. With the fed announcing that they are purchasing bonds and with recent CPI and PPI stats indicating deflation one would think this trade is a stupid idea....and it just might be....but given that the bond market yawned to this supposidly very bullish news it makes me believe that this news is all but priced in and bonds are likely going to be much more sensitive to inflation scares rather than deflation scares.
Also, notice how nobody is talking about the "bond bubble" anymore? When people were talking about it last year expecting it to burst, I knew it wouldn't because everyone was waiting for it. Same thing happens with all bubbles....they don't burst until people become desensitized by the notion and accept the prices as normal. If there is ever a time for the bond bubble to burst it would be within the next 12 months. Wallstreet strategists by the way are recommending a record level allocation to bonds in their model porftolios....after of course they had a huge run....and these are supposed to be the "professionals". I feel good fading them.
This trade is not neccessary to anticipate the bond bubble bursting (although that would nice if it happened), it is based on the notion that I believe we could see a growth scare in the market that will make investors reconsider their very low inflation expecations.
This is 2 month hold and if it blows up in my face..no big deal...I'm not betting the farm here.
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