If the Bond Bounce Intensifies, Traders Should Consider These ETFs

The red carpet walk for bonds in the new year continues as more investors look to add more investment capital to the debt market. That said, traders could also play the continued upside in bonds with exchange traded funds (ETFs) from Direxion Investments that add leverage.

As a Motley Fool article pointed out, key exchange traded funds (ETFs) in the bond market are ticking higher in the early innings of 2023. It’s certainly a stark contrast from last year’s downside that saw the bond market reach bottom-of-the-basement levels as interest rates ticked higher amid the U.S. Federal Reserve’s tightening of monetary policy.

Bond-market declines in 2022 were noteworthy for their size,” Motley Fool reported. “Exchange-traded funds following standard broad-based bond benchmarks were down 13% in 2022, while some long-term bond funds suffered losses of 30% or more.”

The rising of interest rates last year could actually be a boon for bonds this year. Should the Fed tighten monetary policy to the point where it significantly hampers economic growth, it could fuel a safe haven flight towards bonds.

Nonetheless, bonds have skewed to the upside early. It opens the door for bullish investors looking to play the bond comeback, which could intensify in 2023 if the right macroeconomic conditions are in place for a rally.

“Even as stocks have tried to rebound from a tough year in 2022, investors in the bond market have also looked for signs of a potential recovery,” the Motley Fool report added further.

2 Leveraged ETFs for the Bond Bandwagon

Short-term traders could also take advantage of the early upside with leveraged ETFs. Consider two: the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) and the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD).

For the ambitious traders, both funds offer triple leverage, giving them the opportunity to maximize their profits. That said, 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 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.

As for TYD, it 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.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.

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