On 11-September-2018, we changed our short-term minds on interest rates. The bond market has had us particularly concerned throughout the year. After a selloff in Q1, long-term government bonds went into a consolidation period. By the end of the summer, speculators were holding big short positions in the Futures markets, suggesting they were too bearing on the bond market. We thought that would result in a short squeeze in the short-term that would send long-term bond prices quickly & sharply higher. It was our thinking that this short squeeze would set-up a big bull trap as higher prices.
In September the market was not cooperating with this thesis. Interest rates were heading higher and bond prices were headed lower, so we decided to not only get out of the way but to participate in this wave of price activity.
