It appears that investors could be heading back into bonds due to recession fears forcing them to look for safe havens to park capital. In the meantime, however, rising rates could add a dose of volatility, which helps traders looking for leverage.
In particular, they can consider the Direxion Daily 20+ Yr Trsy Bear 3X ETF (TMV ) and the Direxion Daily 7-10 Year Treasury Bear 3X Shares (TYO ). Both options allow traders to play Treasury notes in the long and intermediate ends of the yield curve.
TMV seeks daily investment results before fees and expenses of 300% of the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. TMV invests in swap agreements, futures contracts, short positions, or other financial instruments that provide inverse or short leveraged exposure to the index, which is a market value-weighted index that includes publicly issued U.S. Treasury debt securities that have a remaining maturity of greater than 20 years.
TYO seeks daily investment results before fees and expenses of 300% of the inverse (or opposite) of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index. The index is a market value-weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than seven years and less than or equal to 10 years.
Inflation Re-Rattling Bond Markets?
For the first half of 2022, bonds have been seemingly in lockstep with bonds amid inflationary pressures, resulting in necessary U.S. Federal Reserve tightening to keep consumer prices in check. Heading into the second half, it appeared that investors were ready to jump back into the bond markets, but the latest volatility could have them thinking otherwise.
“Fresh evidence of accelerating inflation rattled bond markets anew on Wednesday, sparking large swings in Treasury yields as traders shifted their bets on how the Federal Reserve and the economy might respond,” a Wall Street Journal report noted.
“Treasury yields, which rise when bond prices fall, jumped immediately after the government released new consumer-price index data, which showed broad-based inflation reaching another four-decade high,” the report added.
Of course, the fluxing up and down can only help bond traders. For amplified gains, TMV and TYO can help in this regard.
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