After heavy downward pressure from inflation and rising rates in 2022, bonds are booming once again, giving the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD) early strength with an 8% year-to-date gain a few weeks into 2023.
That could just be the tip of the iceberg, especially if the macroeconomic backdrop continues to favor bond bullishness for the rest of the year. The global bond market is already skewing to the upside as evidenced by the Bloomberg Global Aggregate bond index, which essentially provides an overall indicator of what bonds are doing.
“The Bloomberg Global Aggregate bond index rose 3.7% in 2023 through Thursday after a 16% decline last year,” Investopedia noted. “The S&P U.S. Aggregate Bond Index fell 12% in 2022 and is up 3.1% since. That compares with the 3.5% advance by the S&P 500 index and a rise of 6.4% for the Nasdaq so far this month.”
This is a rally that’s been brewing since late last year with the expectation that the U.S. Federal Reserve will eventually slow down the pace of its rate hikes in 2023. Thus far, that optimism is holding up as bond traders wait to see what the Fed will do at their next interest rate policy meeting.
“Global bonds have been rallying since late October and U.S. fixed income markets since early November amid multiple indications inflation is fading fast from the 40-year highs reached last spring,” the article added further.
Leveraging the Bond Trade
With such a vast universe of options to choose from in the bond market, traders have a plethora of alternatives. If traders want to maximize their profit potential, particularly when looking at intermediate Treasury notes, TYD is a prime option with its triple leverage.
Per its fund description, TYD seeks 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 10 years.
The bond market can be susceptible to volatile moves. That said, traders can also take advantage of inverse ETFs from Direxion Investments to strategize appropriately in a pullback.
If the uptrend reverses, there are always inverse ETFs to take the other side of the trade. That said, also consider the Direxion Daily 7-10 Year Treasury Bear 3X Shares (TYO) as a tactical tool for trade reversals.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.