dvilayphet

It’s not really about short have some gain, it’s about the spread….during a boom, interest rate spread tightens:
- Interest rates on high credit risk bonds fall (hence prices of bonds go up) so they make money
- Interest rate on treasuries go up, and hence prices drops, and they make money.
In a downturn, the opposite will happen (everyone buys treasuries and flee the risk, raising the interest on high credit risk bonds… and the spread widens…

dvilayphet

The are the SHORT the bond PRICE. Economy drops off, people allocate away from equities into bonds, yields go down but the Bond price value does UP - they lose on the trade as prices are rising and they are SHORT.