explain how to profit credit spreads
1. Buy the 10 year treasury and sell the 2 year
2. Why
3. So you make money on the spread between the two.
If later you sell it back to get your money back (or whatever date you want), then you will have made 6/10 of 1% on that position.
So if you do this with many different spreads across many different maturities (2-10 years) then over time, this is how much money you should be able to make on this strategy.
I would also suggest doing this with other countries as well (if there is sufficient liquidity). For instance, buying German bunds and selling Italian bonds or something like that for some diversification across countries as well as across maturities.
There are other strategies but I think this is probably one of the simplest and most effective ways to profit from rising interest rates without having to predict exactly what will happen with interest rates in any given situation.
No comments.