Robertson reckons inflation could easily hit 7% and that it could even reach 18%. Again, Notes readers will be familiar with this market script. This from eFinancialNews:
Steepeners are a type of interest rate swap, where one party agrees to pay the other a fixed rate in exchange for a floating rate, which is derived from the difference between long and short term rates. Many of these products also use high leverage, where the difference between the two rates is multiplied by up to 50 times to produce a higher return.
Retail investors can make the same play as Robertson without using interest rate swaps. It’s actually very straightforward.
Robertson is betting on the yield curve steepening. This happens when the difference between the yields of short-term and long-term US Treasurys increases. Robertson is essentially short the price of long-term US Treasurys and long the price of short-term US Treasurys.
Anyone with a brokerage account can do this by buying the iShares Barclays 1-3 Year Treas.Bd ETF (NYSE: SHY) and shorting the iShares Barclays 7-10 Year Treas.Bd ETF (NYSE: IEF). This would give you a leveraged return on an inflationary future, which not only Robertson but also many other underground investors we know are betting on.
Robertson reckons China and Japan will stop buying US government debt as the dollar weakens. This would bring down the price of 10-year T-notes and cause the yield to shoot up.