June 29, 2009 – My comments remain unchanged from recent letters. With each passing day, December’s top in prices (i.e., low in yields) looks more and more certain.
However, from a short-term perspective, the price of long-term government paper is in a countertrend rally. In other words, prices are rising, and yields are falling. I don’t expect this decline in yields to last much longer. But I don’t have any specific recommendations for traders at the moment as to when to enter on the short side of this market. So for now, I recommend that traders stay on the sidelines.