Does anyone use Longer Term Treasuries as a hedge? Realizing that in a rising rate environment, Treasuries will likely lose money, they seem to be a great hedge to market shocks and over the long term they have a positive expectancy unlike a short equity hedge. During 2008 a lot of short systems blew up and went the opposite way they should have as the the rush to cover drove up “bad” stocks and drove down “good” stocks. My experience was being short individual stocks as a hedge in 2008 almost made it worse than being long only. After that, I decided the only shorts I was confortable with was at the market level in the form of the SDS ETF or something similar. But over the long term SDS is a drag on performance as it has a negative expectancy. Then I got thinking about long dated treasuries. They have volatility similar to equities and are negatively correlated during market declines. Also, over a longer term (not this year oviously) they have a positive expectancy. Overall, my findings are that long term treasuries smooth out the equity ride similar to a short hedge but also seem to have less of a drag on performance. No one seems to mention Treasuries as a hedge. Curious on people’s thoughts.
I do. But I qualify use by season and direction of interest rates.
Steve