Bullishness could be flooding the bond markets ahead of 2023 after what’s been a forgettable 2022. That said, traders may want to err on the side of bullishness in bonds when the new year comes and investigate leveraged ETFs.
“New year investment advice is typically equivocal as so much can go awry over a 12-month period, but there’s rarely been a consensus as clear as a return to bonds for 2023,” a Reuters column authored by Mike Dolan said.
“By any metric, 2022 has been a torrid time for fixed income,” Dolan noted. “Bonds failed to offset plummeting equities and had one of their worst years in history as central banks ratcheted up interest rates to rein in decades-high inflation amid an energy shock.”
2 Leveraged ETFs to Consider
In addition to playing broad bullishness in the overall bond market via exchange traded funds (ETFs), traders can also play the daily price movements in bonds while maximizing their gains as well. This can be accomplished with Direxion Investments’ ETFs that can play both sides, whether bullish or bearish.
With yields falling and, conversely, prices rising, it opens up bullish opportunities for Treasury notes. Direxion Investments has a pair of funds that can play off traders’ bullish notions if they foresee Treasury prices recovering, especially if the Fed decides to take its foot off the accelerator pedal on rate increases.
The pair of funds to consider are the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) and the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD). As mentioned, both funds offer triple leverage, giving traders the opportunity to maximize their profits, but as such, only seasoned traders should consider these funds.
TMF seeks daily investment results of 300% of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) 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. 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.
Likewise, 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.
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