A bond rally could be in the works as incoming economic data could hint at a cooling economy. That could bring the 2% target inflation rate closer for the Federal Reserve. Meantime, yields have been falling, opening up opportunities in leveraged Treasury ETFs.
“A slide of at least 15 basis points so far this week was the story for five, 10-, and 30-year Treasury yields,” reported Bloomberg. “Sparked by weakness in a manufacturing gauge Monday, the rally was revived by a bigger-than-expected slide in US job openings Tuesday. Yields were near session lows last seen in mid-May during New York afternoon trading.”
The S&P 500, up 12% for the year, continues to climb. though maybe not at the same momentum as the start of 2024. To some market observers, signs of a cooling economy should spark a surge in equities. But there are concerns over economic and earnings growth.
“Thus, stocks have not responded in the usual way of cheering on weaker-than-expected data,” said Fawad Razaqzada at City Index and Forex.com. “[Are] we finally headed for a long overdue correction now? The S&P 500 outlook is not bearish. [Yet from a technical viewpoint, the] potential is there for that to change in the coming days.”
Equities could languish in the summer. But the bond market may give traders profitable opportunities if yields continue to rise. In that case, traders will want to look at a pair of leveraged funds from Direxion Investments.
2 Ideal ETFs for a Bond Rally
Ideal funds for a bond rally include the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF ) and the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD ). Both include 200% leverage, offering the ability to maximize profits if Treasury notes continue to show upside.
TMF seeks daily investment results of 300% of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. That is a market-value-weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than 20 years.
Likewise, TYD seeks 300% of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index. That 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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