As the capital markets continue to digest news regarding positivism around a vaccine amid rising coronavirus cases, the risk-on sentiment is bringing in the bears for the bond market as of late, according to a Direxion Investments Xchange post. Traders looking for opportunities in today’s bond market can look at a pair of inverse ETF options in Treasury notes.
These funds include plays on shorter and longer-termed Treasury bonds:
Direxion Daily 20+ Year Treasury Bear 3X ETF (TMV): 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 20+ 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 20 years.
Direxion Daily 7-10 Year Treasury Bear 3X Shares (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 ten years.
A Reversal of Fortune
In the months before the election, yields started to climb higher and conversely, bond prices dropped in a renewed risk-on sentiment for equities:
“Since August, the price of U.S. bonds and treasury notes has receded alongside the drop in the dollar’s value. This has boosted Direxion’s most popular bearish fixed income leveraged ETFs. The Direxion Daily 7-10 Year Treasury Bear 3X Shares ETF (TYO) and the Direxion Daily 20+ Year Treasury Bear 3X Shares ETF (TMV) have each risen by 7% and nearly 31% over the previous three months,” the Xchange post noted.
“That recent downtrend stands in stark contrast to the trajectory of fixed income assets through the majority of 2020, which have been in high demand as increased economic uncertainty pushed investors toward the stability of U.S.-issued debt,” the post said. “Until recently, fixed-income investments have surged as other currencies labored under stagnant economic growth.”
The Federal Reserve’s decision to stimulate the bond markets earlier this year is still apparent in the bullish counterparts of TYO and TMV.
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