Julian Robertson's Steepener Swap Play

From Market Folly - Short Treasuries and Bonds, inflation is coming. But not now, there has been a huge drop in bond prices eg 25% ytd 2009. They should be finally due for a correction.
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Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes' billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the 'Tiger Cubs.' And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.....

The sudden and rapid decline is most likely due for a correction and we do not feel that the current time is ideal to initiate a position in shorting treasuries. We would look for any sign of a rebound before putting on a new short position. That said, we still feel the move in treasuries will take many years to fully play out and this is a very long-term inflationary bet. While short-term moves like the one we've seen this year are nice, things could take much longer to play out than people realize. We consider the publication of our post on this topic to be a contrarian indicator. After all, when there are headlines saying for you to get into something after a big move has already taken place, it's time to at least take some profits. So, place your bets with caution, as you'll have plenty of time before inflation truly rears its ugly head.

Treasury Yields Reach Five-Month High as Fed Stands

As demand for funding by the government increases, so does interest rates. Anyone surprised? It appears a few fund managers have been.

May 2 (Bloomberg) -- Treasury 10-year notes declined for a sixth week, the longest losing steak in almost two years, as the Federal Reserve refrained from increasing purchases of government debt and the economy showed signs of stabilizing.

Next Bubble to Pop - US Bonds? NYT

Treasuries bear risk, in particular, the risk that flows from crowd psychology. Last month, in his annual letter to shareholders Warren Buffett wrote: “When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Jim Rogers was Right

March 9, 2009 Bloomberg reported that Jim Rogers said that in order to keep its borrowing costs down, the U.S. Fed will likely start buying Treasuries... driving prices up and yields down. On March 18, 2009 the US Fed announced its would just do that. Jim Rogers says that this action "setting things up for a gigantic fall down the line."“Governments are printing money everywhere, borrowing stupendous amounts. Throughout history that has led to problems in the bond markets, and it will this time too.