This yield curve has a saggy diaper that leaks

Don Kaufman here.

Look, I’m gonna tell you something that’s gonna sound completely backwards to everything you’ve been hearing about markets right now.

Everyone’s sitting around waiting for the Fed to save us if things go south. Fed put this, Fed put that. Powell’s gonna ride in on his white horse and cut rates if the S&P sells off, right?

I think that’s complete crap.

That’s why I’m literally putting my money where my mouth is on this – there’s actually a Treasury put in place in the bond markets specifically.

The 4.5% Panic Line Nobody’s Talking About

Okay, so right now the 10-year is sitting at 4.423%. We’re really freaking close to 4.5%, and that 4.5% number? That’s where Scotty B over at the Treasury may actually have a little bit of a freak out.

Why? Because they’re rolling massive, massive amounts of debt. And when I say massive, I mean look at this yield curve – it’s got a saggy diaper that leaks.

The one month is at four, the one year is at four, the 10-year is at 4.4, the 30-year is at 4.9. Where the hell are you gonna roll to in this curve?

You can roll to three years and make it a three years’ problem. Or maybe roll to seven or ten years and make it another administration’s problem.

That’s literally how the Treasury Secretary thinks, by the way.

But here’s the thing – if this 10-year gets above 4.5%, there’s gonna be some panic because they have huge amounts of debt they’re gonna have to roll into these longer durations.

The Trade Everyone’s Missing

I’ve already done this a couple times since the administration came in – I’ve been selling bond puts. And I’m gonna do it again.

Holy crap, even if they go in the money, if you can roll them and sustain the position, you’re gonna be fine. You will be fine.

Why? Because right now, as long as you know Scotty B is running the Treasury, I think there’s gonna be a put in place.

There’s gonna be a floor. I don’t know where the floor is, but you better believe it’s there.

And it probably has a lot to do with that 4.5% on the 10-year.

The Banking Crisis Nobody Wants to Admit

By the way, here’s something the marketplace is completely ignoring right now – any bank that’s sitting on duration paper, any bank that owns bonds or notes, they are getting killed on paper.

If you bought these bonds anytime since roughly 2019, you are getting your head handed to you.

Absolutely. But the market’s just like, “Don’t worry about it, if they hold it for the duration, it’ll come back.”

The only problem?

Some of the losses are so significant when they mark to market that some of the banks may not be able to hold them. And that would be the rumblings of another Silicon Valley banking crisis.

If it’s gonna happen, it’s gonna happen at the regional bank level. That’s why I’m watching KRE so carefully.

My Personal Trading Confession

I have to be honest with you – I once dated someone that was into technical analysis. Can you believe this? I actually dated somebody that looked at technicals and she definitely used fibonacci’s.

I can’t even say it with a straight face. Can you imagine the pillow talk? I mean, holy crap, she’s talking about charts. It’s brutal. Just brutal.

The reason I feel empowered to make fun of those that look at charts is because I fully understand them. I literally ran the charting portion of thinkorswim – that actually belonged to my area. So I had to learn about all this crap.

The Opportunity Right Now

Look, we’re not quite there yet with the bond puts, but we’re really close. We start getting to like 111 on the bonds, and I’ll start salivating for some positions.

I would sell puts very far out in time – stuff that’s like 80 days out. There’s no reason you don’t want to go further out because there’s a little bit more volatility, a little bit more uncertainty.

We go further out, we collect about 50%, we get back, we reduce risk and it’s good.

You might be able to sell boatloads of puts knowing that the Treasury will do everything in their power to keep those bonds afloat.

What to Do When Everyone Else is Wrong

While everyone’s focused on Fed policy and tariff noise, the real story is what’s happening in the bond market. The Treasury Secretary is sitting in front of a Bloomberg machine every single day looking at the yield curve, and they’re getting nervous.

When I do execute this position, I’ll trade it in a couple different portfolios. But here’s the thing – if you have a ThinkorSwim account or Tasty account, you should open up the futures account. The bond puts are futures – they’re options on futures.

The margin on ZN (ten-year) isn’t bad – it only ties up $2,500 overnight for the full futures contract. You probably need like a $10,000 account, which isn’t unreasonable.

What to do next…

Start watching 10-year yields. When they approach 4.5%, prepare to sell bond puts 80+ days out. The Treasury put is real, and it’s more reliable than anything the Fed’s offering right now.

I’m telling you – there’s literally not a Fed put in place. But there’s something better.

To your success,

Don Kaufman

P.S. Okay, real talk – if you’re serious about this stuff and not just window shopping, the chatroom is where I actually show you how to do it. Click here if you want in.

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This yield curve has a saggy diaper that leaks

This yield curve has a saggy diaper that leaks

The 4.5% Panic Line Nobody’s Talking About

The Trade Everyone’s Missing

The Banking Crisis Nobody Wants to Admit

My Personal Trading Confession

The Opportunity Right Now

What to Do When Everyone Else is Wrong

What to do next…

ONE STOCK. ONE SYSTEM. ONE SHOT AT TRADING FREEDOM.

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