How to bet against US debt as rates climb

Betting against US debt: the market's tools

US debt is soaring and the market is rubbing its hands. Not to buy, but to bet that long-term rates will keep climbing. The bond shift is no longer a hypothesis: the market has been warning for months, even if the Fed insists on smoothing over the curve. How can you profit from rising long rates if you think the official narrative is smoke?

The instruments exist, but each one has a catch. Direct shorts in Treasury futures (ZB, ZN) are liquid and convenient, but carry becomes lethal if the Federal Reserve forces a pause. Inverse ETFs like TBT (ultrashort 20+ years) offer double leverage, but daily volatility erodes long-term returns through the effect of compounding percentages. For the more sophisticated, put spreads on IEF or TLT allow you to control theta and limit gap risk, though they are not for the faint of heart. And peine, which bet on a steepening of the curve by buying TY1x and selling ZN, require closely trinc the Fed's moves.

But some are looking beyond the dollar. Several analyses point out that the greenback's tendency is to depreciate in the medium term, no matter how much rates rise. The argument: sovereign debt is losing its appeal as a safe haven and countries are looking to offload paper they consider increasingly unsustainable. Against that backdrop, gold emerges as an alternative — silver is ruled out for its volatility — and the euro does not fare much better, weighed down by its own monetary laxity.

With the US bond yield already at 5%, the question is whether the Fed's money printer can keep running without consequences. Those betting against US debt have tools, but the road is full of hidden costs and timing risks. Is the party really beginning for the shorts?