Recommend you all re-visit this topic from few months ago:

http://piggington.com/treasuries_another_bubble

I didn’t post that original thread, but it got me looking into this topic, have been following it ever since. Back then I concluded it was too early to short the short-term treasuries. I was right about that. However, some VERY smart people (Jim Rogers, and others) have been working this angle for months now. Several months ago, Jim was interviewed on Bloomberg (or was it CNBC?) talking about his bets against the “bubble in US treasuries”

Assuming Rogers shorted the treasuries (short-term) from mid-Sept to mid-Oct, he made money; however, since then yields at the auctions have come down even much lower. Yesterday the 3-month bills even touched ZERO yield, and much of them sold at 0.05%. Insane!

I think I’m ready to start building short positions on the short-term US Treasuries because yields have been driven to insanely low levels on global flight to “safety” (are they really safe?) of US Treasuries.

To see the effect this has had on the bonds (values move opposite yields), go and chart these bond funds:

Name Symbol
Barclays Short Treasury Bond Fund SHV
Barclays 1-3 Year Treasury Bond Fund SHY
Barclays 3-7 Year Treasury Bond Fund IEI
Barclays 7-10 Year Treasury Bond Fund IEF
Barclays 10-20 Year Treasury Bond Fund TLH
Barclays Aggregate Bond Fund AGG
Barclays 1-3 Year Credit Bond Fund CSJ
Barclays 20+ Year Credit Bond TLT

http://us.ishares.com/product_info/fund/index/FI.htm

You’ll see the 3-7 year bond funds have been climbing dramatically since mid-June. The 7-10 year bond fund jumped over 10% just since Oct 14th. These unusual trends cannot continue indefinitely. Look at the recent yields on treasury auctions. How much lower can these yields go!

I’m looking at ProShares ETF ticker “PST” as a tool to short this US Treasury bubble. It is designed to achieve twice (200%) the inverse (opposite) of the daily performance of the Lehman Brothers 7-10 Year U.S. Treasury Index. I think it wise to start with nibbles (5% of portfolio or less) at buying PST, then watch and wait to see what happens.

http://www.proshares.com/funds?products=&fundType=Fixed-Income