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The Rough Seas of Bond Trading

Cramer lists the reasons why he's venturing out into the bond market.
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How rough do these bonds want to make it for us? I just bought some 30-year U.S. government paper, and I feel like I just got snared by some crummy .com. I was down five ticks before the trade could be booked!

What's going on? Could the refunding (10-year in particular) be causing all of the weakness?

This bond market is heavy, so heavy that when you go in, it smells a buyer and whacks you before you can get your buy order out of your mouth.

So why buy?

Because I am not fazed by the technicals. Because I believe bonds have gotten more interesting at this level than they have in some time. Because I see no inflation, even though growth remains high. Because I think I can make money.

First, let me say that when I buy bonds, I fully expect that my first buy won't be my last. I use pyramid buying in bonds, my first trade small, a couple million (Look, it's bonds, you gotta trade 'em in millions if you want to be in the game. These aren't slots; there is no $2 table), and then I get bigger as they go down. When bonds get to 91 offered, I want my full position. I think they get there by the refunding. At that point, I will come close to doubling down, with the idea of a recovery back to 5.625, a nifty capital gain.

Of course, the bond market will dominate the action in stocks and will continue to put a lid on things until they pop. In that backdrop, the cyclicals thrive and growth falters, so we will probably stay on that script until we see the whites of the 6% eyes on the long bond.

So, I am keeping my cyclicals on as a balance to my bond position. That way, I feel I can win with either hand.

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James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Lycos and 30-year bonds, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at