Established Long-Term Bearish Bet on U.S. Treasury Bonds

Within our Trading allocation, which we eventually target for 10% of our asset allocation, we established a small, long-term bearish bet on U.S. Treasury bonds. This is consistent with our writings on this blog that the U.S. government is badly undermining its creditworthiness with all manner of stimulus plans, at a time when we think big foreign investors will increasingly look to diversify their holdings away from the U.S. We also think that the massive "flight to safety" of the past year, which has significantly boosted long bonds, will increasingly shift toward shorter-dated U.S. treasuries, which would take away from demand for long bonds. A small datapoint along these lines came this week when demand for a treasury bond auction was weak. We used the Rydex Inverse Government Long Bond fund (RYJUX).