Coronavirus fears are infecting yields in safe haven government debt as the 10-year Treasury yield continue to flirt with lows in Wednesday’s trading session. Per a CNBC report, the “yield on the benchmark 10-year Treasury note, which moves inversely to price, fell two basis points to around 1.313%.”
In Tuesday’s trading session, the 10-year note hit an all-time low of 1.307% as the Dow Jones Industrial Average turned in a second losing session. On the longer end of the yield curve, the 30-year Treasury note touched down at 1.807%, to also near its record low.
On the heels of more session losses, the “S&P 500 posted back-to-back losses of more than 3%, suffering its biggest two-day plunge since 2015,” according to the CNBC report. However, it wasn’t all doom and gloom as lower yields could be spurring more demand for homes as rates remain low.
“Yield pared early gains on Wednesday even after data showed new home sales jumped 7.9% to a seasonally adjusted annual rate of 764,000 units last month, the highest level since July 2007,” the report noted.
Traders are already betting that lower rates could be on the way sooner rather than later. Based on CME’s FedWatch Tool, the expectation is that a rate cut has a 60% chance of happening.
“Expectations the Fed will be forced to cut relatively soon are leading to a re-resteepening impulse,” Ian Lyngen, BMO’s head of U.S. rates, said in a note on Wednesday.
Investors salivating at an opportunity to trade Treasurys can look at these four leveraged ETFs to trade:
- Direxion Daily 7-10 Year Treasury Bull 3X Shares (NYSEArca: 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 ten years.
- Direxion Daily 7-10 Year Treasury Bear 3X Shares (NYSEArca: 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.
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