It’s prudent for traders to keep expecting that interest rates will be a major mover of markets in 2023. With the expectation that the U.S. Federal Reserve is slowing down the pace of its rate hikes, it opens opportunities for leveraged exchange traded funds (ETFs).
The Fed instituted another rate hike, but as opposed to a previous 75 basis points, this time it was 50 basis points, or half a point. Investors and consumers alike witnessed the Fed say that inflation could be progressing at a slower clip than previous months.
“We’ve continually expected to make faster progress on inflation than we have,” said Jerome H. Powell, the Fed Chair, during a news conference after the rate hike announcement. Powell, along with his colleagues at the Fed, noted: “Slower progress on inflation, tighter policy, probably higher rates, probably held for longer, just to get you to the kind of restriction that you need to get inflation down to 2 percent.”
“Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases,” Powell added. “But it will take substantially more evidence to have confidence that inflation is on a sustained downward” trajectory.
That said, traders can play the rise and fall of rates with leveraged ETFs. Direxion Investments offers ETFs that can capture both sides, whether the traders want to play off their bullish or bearish notions.
Play the Rise and Fall of Rates
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 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 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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