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Comment by Aelinsaar | Hacker News Reader

I would not want to be holding US debt, this election cycle.

If you think you know something about the value of treasuries in the future there is a fortune for you to make in the financial market.

> If you think you know something about the value of treasuries in the future there is a fortune for you to make in the financial market.

No, if you actually know something about the value of treasuries in the future, there is a fortune for you to make in the financial market.

If you merely think you know something about the value of treasuries in the future, that's a different story.

But, anyway, the grandparent post wasn't expressing knowing something about the value of treasuries in the future, they were expressing a perception of risk, which is exactly the opposite.

Oh, if you know that risk is going up, you can buy (long term) credit default protection now, and sell it once the market recognizes the risk, too.

(You don't need an actual default for the credit default protection to appreciate in value, just more of a perception that the risk of a default has gone up.)

Buying credit default swaps on US treasuries is like buying suntan lotion in anticipation of a nuclear attack. No counterparty can credibly insure such an event & the money you would make in a cash-up-front variant would be incredibly likely to become worthless.

Oh, I don't suggest holding to maturity. I suggest selling when the market's perception of risk has crept up to the level one feels justified by fundamentals.

A CDS can pay the difference if a government decides to pay a fraction of the full value. This has happened in other countries without total financial collapse and could feasibly happen in the US if it has a president that actively wants to negotiate debt down.

You could also purchase PUT options on a bond ETF like TLT where the counter-party will be the OCC, which will have little exposure to the turmoil in the bond market like a bank that would underwrite a CDS.

What manner are you short Treasuries? Any recommendations?

Can you name a safer financial instrument than US debt? Its definitely not fiat currency nor metals (incl. gold).

> Can you name a safer financial instrument than US debt? Its definitely not fiat currency

I dunno. I mean, US government debt is conceptually subject to both US monetary risks (the same as US dollars) and US government fiscal risks, so US government (dollar-denominated) debt must always be (even if only infinitesimally) less safe than at least one fiat currency, to wit, the US dollar.

In what case would tbonds go down but not the dollar?

Depends on what risks you are looking for. Singapore debt might be in sounder management, but of course the country is smaller; so more of a playball.

Gilts have historically been there-or-thereabouts in terms of interest rate with respect to US Bonds.

Certainly in the last decade they are near indistinguishable.

https://bankunderground.co.uk/2015/08/28/the-special-relatio...

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