When it comes to short-term trading opportunities, stocks are certainly not the only game in town, especially with the way the debt market has seen its fair share of volatility. As government bond yields rise and fall, it can help to keep strategic leverage exchange traded funds (ETFs) handy to extract profits.
The third quarter should bring plenty of opportunities with a lot of unknowns still present heading deeper into the second half of 2022. The big question on investors’ minds is whether the ongoing rate hikes will eventually drag the economy into a recession.
In the short-term micro view, investors will be watching the latest employment numbers. Namely, June’s nonfarm payrolls will give an indication of whether cracks are starting to appear in the labor market and show early signs of a slowing economy.
“Employment should slow from May. Whether it goes to 250,000 consensus or more, there’s always volatility,” said David Page, head of macro economic research at AXA Investment Managers. “The trend is going to be lower, and I wouldn’t mind betting it would be in 150,000 to 200,000 by early Q3, and it could be certainly lower by the end of the year.”
2 ETFs to Play the Move
More unknowns should give benchmark Treasury yields more volatility, which traders can use to play the ebb and flow of bond prices. As such, for the long-term benchmark yields, traders can consider the Direxion Daily 20+ Yr Trsy Bear 3X ETF (TMV).
TMV seeks daily investment results equal to 300% of the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. TMV invests in swap agreements, futures contracts, short positions, or other financial instruments that provide inverse or short leveraged exposure to the index, which is a market value-weighted index that includes publicly issued U.S. Treasury debt securities that have a remaining maturity of greater than 20 years.
If yields fall, then traders can play the bullish side of rising prices in long-term Treasury bonds with the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF). 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 invests 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. Like TMV, 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.
TMF and TMV give investors the ability to:
- Magnify short-term perspective with daily 3X leverage.
- Go where there’s opportunity, with bull and bear funds for both sides of the trade.
- Stay agile with liquidity to trade through rapidly changing markets.
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