Gilts are really cheap (as of the close of 9/25). The problem is that there are no other bond markets to short against them [none are rich]. Equities of course have a negative correlation to bonds so if they are cheap we have a potential cross asset trade.
This chart shows you how cheap Gilts were :
The S&P has pulled back and yet is still in an uptrend:
The correlation between the two [R] averages about –.35 Gilt futures are 35% as volatile as ES futures so we need to buy 3 times as many of them as we do ES contracts.
The topping on this cake is that most bond markets are in double anchor rallies so we actually have uptrends in both bonds and stocks to buy into.
