Treasury note prices may have already reached rock bottom, giving bullish traders a chance to play off the notions of a potential comeback after a rough-and-tumble bond market for 2022 amid U.S. Federal Reserve monetary policy tightening that’s been pushing yields higher.
The bond markets could potentially be showing signs or traders could be betting that the Fed will eventually scale back on rate increases. It could also just be a calm before the storm as the markets digest forthcoming data.
“Treasury yields fell again on Wednesday, as markets absorbed housing sector data and paid close attention to earnings reports, scanning the numbers for hints about a looming recession,” a CNBC report said. “The 10-year Treasury yield was last down by close to 10 basis points to 4.011%. The benchmark note has come off the 14 year highs it was trading around just last week, when it soared as high as 4.3%.”
Play the Fall in Treasury Yields
With yields falling and conversely, prices rising, it opens up bullish opportunities for Treasury notes. Direxion Investments has a pair of leveraged exchange traded funds (ETFs) that can play off traders’ bullish notions if they foresee Treasury prices recovering, especially if the Fed decides to take its foot off the accelerator pedal on rate increases.
The pair of funds to consider are the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF ) and the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD ). As mentioned, both funds offer triple leverage, giving traders the opportunity to maximize their profits, but as such, only seasoned traders should consider these funds.
TMF seeks daily investment results, before fees and expenses, of 300% of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the 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.
TYD seeks daily investment results, before fees and expenses, of 300% 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.
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