There are also talks of the U.S.’s AAA credit rating being downgraded. If this were to happen then investors would demand higher yields for the riskier debt, which would push Treasury prices down.
When the U.S. government eventually raises interest rates, Treasury prices will fall and yields will rise. More recently, the U.S. has auctioned Treasuries and demand was low. Treasury prices may continue to fall as the government tries to sell more Treasuries that borrowers won’t be too enthusiastically investing in.
How can someone capitalize on decreasing Treasury prices? There are some short Treasury ETFs available but be sure that you understand the risks involved in investing in leveraged funds before you part take in them.
- Ultrashort Lehman 20+Year Treasury Proshares (TBT): up 51.4% year-to-date
- Direxion Daily 30 Year Treasury Bear 3X Shares (TMV): up 43.6% in the last month
Max Chen contributed to this article.