Tag Archives: fixed income trade ideas

Global Macro Think Tank Rate Hike Hedge: A Rareview Special

Within the context of continuous guessing as to the outlook for a rate hike, and how to hedge fixed income portfolios accordingly, getting a strong fix on fixed income strategies has proven to be a challenge for a vast majority of professional investors during the past 24-26 months, many of whom have replaced high-priced wall hangings with dart boards.  Many other managers prefer to simply hum “Lower for Longer” to themselves. For global macro-focused fund managers, MarketsMuse spotlights a refreshing update from Rareview Macro LLC, the global macro think tank and publisher of professional newsletter “Sight Beyond Sight.”  Below please find opening excerpt from today’s edition

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

We are pleased to present our new portfolio construction, including four new trade ideas and a tail risk hedge that make up our core fixed income strategy. As is customary, each one includes our standard trade matrix with a pre-defined game plan for managing gains and losses.

For those that regularly traffic in fixed income, we look forward to any feedback you may have and a spirited debate on our ideas. We are confident they are sufficiently robust to survive some criticism.  For those not in fixed income, please feel free to share this internally with your colleagues who are.

  • TRADE 1 – Gradual/Variable pace of rate hikes
  • TRADE 2 – Leverage on Gradual/Variable pace of rate hikes
  • TRADE 3 – Targeted field bet on no rate hikes in 2015, recession book overlay
  • TRADE 4 – “Uncertainty” Risk Premium
  • TRADE 5 – Choke Yourself Tail Hedge

Highlights:

  • Thematic view, not tied to day-to-day movements in the long bond
  • Multiple sources of return attribution
  • High return on capital: Low option premium outlay, high leverage
  • High risk/reward: Lose 1.5% (realistic) to 3% (absolute) of the NAV to make 6% to 8%
  • Both quantitative and qualitative risks clearly expressed

Above is the teaser, those interested in drilling down into the above, today’s edition of Sight Beyond Sight is available by clicking this link.