Treasuries in focus as Citi, Michael Burry see higher yields

Brian Cheung joins Brian Sozzi and Julie Hyman to break down Michael Burry and Citigroup’s decision to short treasuries and the impact this position can have on the market moving forward.

Video transcript

- And just real quickly, Brian. Interesting this morning. Getting some chatter about shorts on treasuries from Michael Burry who at least was short treasuries as of the latest filing date through put options on the tilt. The 20-year bond ETFs Citigroup's desk apparently also calling for 2% bond yield still. Which is interesting in the face of what we've been hearing from the Fed.

- Yeah. And it's not unlike what we were hearing in April when we saw bond yields really ripping higher. But of course, we know the story since then bond yields have come back down precipitously.

But it seems like we're getting some pretty kind of hard bets right now in terms of these types of firms wanting to see the 10-year go higher and longer term bond yields broadly go higher. So when you talk about Michael Barr again psion Asset Management. The reporting is that he has put or that firm has put some puts.

Again, this is the type of option that would give you the right, but not the obligation to sell securities on the iShares 20 plus year. Treasury bond, ETFs. That's ticker TLT.

And in a similar vein, Citi is telling clients that 10 year should be climbing to 2%. Of course, over time what time horizon it's a bit unsure. But that's a ways to go from where we are right now when you take a look at the US 10 year of just 127 basis points.

So again, this is a call that we have heard before, whether or not. In August, that call is different than it was in March and April of this year remains to be seen. But it seems like at least for right now, there is a bet that based on what the Fed might be doing, and just kind of how the economic reopening will go. That at some point, there's going to have to be some steam out of the risk free market guys.

- Brian, is that a new Patagonia? That is a nice looking Patagonia vest I've ever seen.

- You know, it is a new one. But I say I shouldn't be wearing it in this type of East Coast summer weather right now even though it's raining outside. This is really supposed to be for those early mornings out west.

I'm heating up right now. I'm sweating a little bit right now. And it's not just because I'm beating up on yeild. Get a little hot.

- Well, hopefully, next year, next year in Jackson Hole as well. We'll have our fingers crossed for-- for that for sure. Thanks so much, Brian. Appreciate it.