Yes, yesterday’s drop & especially the big gap down was larger than I anticipated when I added the trade. In that original post, I stated my concerns for that trade, including the following:

“While this is certainly a counter-trend trend, which increases the odds that it may not pan out as we don’t yet have any decent sell signals on long-term Treasuries…” as well as “I will also add that a pullback in Treasuries doesn’t particularly align with a sharp drop in the stock market from here so if equities continue to sell off impulsively in the coming days to weeks without a decent snap-back rally, that would likely, but not necessarily, provide a headwind for a short trade on US Treasury Bonds, as they are typically a flight-to-safety asset class which tends to rally during stock market corrections.”

Yesterday was the biggest drop of the year & one of the biggest single-day drops in years and as such, the flight-to-safety bid for Treasuries was certainly one of the driving factors behind the rally in TLT as well as the ramp-up in the trade wars which further increased the odds of a recession, thereby pushing down long-term interest rate forecasts (and long-term Treasury yields along with it).

The TBT trade was also a quasi-indirect hedge against an equity short position because had the stock market rallied for even just a day or two after TBT was added, Treasuries would have likely had the minor pullback with TBT hitting that shallow target but things went the other way.