Our expectation was that we were going to get an opportunity to buy US 10yrs at a yield over 2% going into tomorrow’s 10yr auction - higher yield, lower price. However, our Methodology called for the US 10yr buy today at 2.01%. To reiterate, we expect US long rates to come down, prices to go up as US rates approach lower global long rates and we do not expect the Fed to tighten anytime soon. Currently, US 10yr rates are +165bp higher than Germany and +160bp higher than Japanese 10yr rates. We approached 2% on the US 10yr because Friday’s Payroll numbers indicated some economic growth. It will be interesting to watch the US equity markets decide if our economic growth is enough to counterbalance the deflationary pressures in Europe and the Fed’s expected tightening. On the close, we will be looking to get out of our S&P short if the S&P closes above 2057.
Tuesday, February 10th, using the March futures, we went long a half position in the US 10yr note at an equivalent yield of 2.01%. We are now long the half position in the US 10yr and are short half positions in the S&P 500 and the Euro$ and are 75% invested.
Modeled performance since inception, May 2012, net of all fees is +128.90%
In 2012 modeled performance (7 ½ mo.) net of all fees was +12.46% with a 10% Hurdle rate
In 2013, modeled performance net of all fees was +19.73% with a 10% Hurdle rate
In 2014, modeled performance net of all fees was +56.42% with a 10% Hurdle rate
In 2015, modeled performance net of all fees is +10.41% with a 8% Hurdle rate