Rosy Outlook for Bonds Could Boost This Bullish Leveraged ETF

Investors are developing a taste for bonds again, putting the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) in focus for traders. Even if bonds don’t stage a long-term comeback in 2023, the fund allows traders to scalp gains off the recent strength.

It’s a much-needed turnaround for bond investors after an easy-to-forget 2022. Rising interest rates have soured the taste for bonds, but less aggressive rate hikes in 2023 by the U.S. Federal Reserve could provide enough of a catalyst for bonds to come back.

“Bond investors may take some solace as the year draws to a close; it couldn’t have been much worse,” a Barron’s article said. “Almost every area of fixed income suffered its steepest loss in decades. The Bloomberg U.S. Aggregate Bond Index fell about 11%. Even if it rallies a little from here, it’s on track for its worst performance since the index’s inception in 1976.”

“The market and prognosticators, myself included, completely underestimated the path and strength of inflation, so it caught everyone off guard, including the Federal Reserve,” said Gregory Peters, co-chief investment officer at PGIM Fixed Income.

Thrice the Leverage of the 20-Year Treasury Index

For traders looking to maximize their gains, TMF provides leveraged exposure. TMF 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 fund invests the majority of its net assets 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.

TMF, and other leveraged products from Direxion Investments, give investors the ability to:

  • Magnify short-term perspective with daily 3X leverage.
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade.
  • Stay agile with liquidity to trade through rapidly changing markets.

As 2021 turns into 2022, a lot of questions will remain as to where interest rates will head despite the prevailing marketing thinking they will head lower. Can the bond market come back in a big way after a forgettable 2022?

These are things that TMF traders will have to keep in mind, but the more volatility the better for action-oriented traders looking to make short-term gains in Treasury movements.

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