The bond price rally appears to be short-lived as yields are starting to tick higher again. This opens the door for traders to gain from bearish bond prices as central banks from around the world continue to raise rates in order to keep inflation in check.
The European Central Bank (ECB) recently pushed rates higher in order to tamp down inflation, and U.S. Federal Reserve Chairman Jerome Powell warned of more “pain” ahead as rising consumer prices continue. Additionally, the Fed’s Beige Book noted that inflation could be cooling, but is still relatively high while weak U.S. growth and a weakening real estate market could continue weighing on the economy.
“So far, we have expeditiously raised the policy rate to the peak of the previous cycle, and the policy rate will need to rise further,” said Federal Reserve Vice Chair Lael Brainard, in a CNBC report.
2 ETFs With Added Leverage
As mentioned, fizzling bond prices open up opportunities for bearish bond traders. For options in leverage exchange traded funds (ETFs), consider the Direxion Daily 20+ Yr Trsy Bear 3X ETF (TMV) and the Direxion Daily 7-10 Year Treasury Bear 3X Shares (TYO).
TMV seeks daily investment results before fees and expenses of 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.
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 10 years.
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