A vaccine rally and a Joe Biden presidency should continue to provide headwinds for the debt market, as investors turn up the dial on risk and avoid safe havens like Treasuries. On the flip side, more bond-buying by the Federal Reserve could push yields even lower and prices higher, feeding into leveraged Treasury ETFs.

If bulls sense that Treasury yields will fall and prices will subsequently rise, then one strong play is the Direxion Daily 7-10 Year Treasury Bull 3X Shares (NYSEArca: TYD). The fund 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.

TYD Chart

On the long end of the yield curve, there’s the Direxion Daily 20+ Year Treasury Bull 3X Shares (NYSEArca: TMF). The fund 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 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 Chart

More Bond-Buying Ahead for the Fed?

Amid the pandemic earlier this year, the Fed stepped in to shore up the bond markets, and has continued doing so since. More purchases could be on the way to help buoy bond prices and keep rates low.

“Federal Reserve officials are likely to unveil this month new guidance about how long they expect to continue their current asset-purchase program,” a Wall Street Journal article noted. “The approach, which would be detailed at their Dec. 15-16 meeting, would align the program with conditions they spelled out in September about how long they expect to keep interest rates near zero.”

Are adjustments on the way for their current bond purchasing program? Not likely.

“But in recent interviews and public remarks, officials have said they don’t think they need to change the asset-buying program now to deliver more economic stimulus,” the article noted. “Since the Fed’s previous meeting in early November, several drugmakers have released very positive news about vaccines against Covid-19. While rising virus infections could lead to weaker-than-expected economic activity in the coming weeks, the vaccine progress has reduced the chances of much weaker growth in 2021.”

“The risk characterization has improved,” Chicago Fed President Charles Evans said on Friday.

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