Investors have been fretting over the potential of an economic slowdown due to the pace of rising rates, and that may be manifesting itself already with a slowing labor market. In the meantime, this could feed into opportunities for traders in Treasury notes.
CNBC reported that positions fell to 9.93 million in February, which could signal early warning signs of an economic slowdown. In an effort to tame inflation, the U.S. Federal Reserve has been in a well-documented wrestling match with interest rate policy and how best to raise rates without upsetting the economy too much.
“Meanwhile, traders remain focused on the likely trajectory of monetary policy, as the Federal Reserve continues its efforts to rein in inflation against the backdrop of persistent concerns about economic growth, and following several banking collapses that caused chaos in bond markets over the past month,” CNBC noted.
Traders are already placing bets on more rate hikes, which could potentially slow the economy further. If that’s the case, more investors could pile into safe haven assets like government bonds or specifically Treasury notes.
“The Fed isn’t scheduled to meet until early May, but traders are pricing in a 60% chance that the central bank will hike rates by 25 basis points next month, according to the CME Group’s FedWatch tool,” the CNBC report added further.
2 Options to Trader Rising Treasury Notes
As opposed to trading Treasury notes directly, traders can also use leveraged exchange traded funds (ETFs) from Direxion to maximize profits. For rising Treasury notes, consider the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD).
The fund seeks daily investment results, before fees and expenses, of 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.
Given the fluctuations in Treasury notes, leveraged ETFs also allow traders to play the bearish side using the Direxion Daily 7-10 Year Treasury Bear 3X Shares (TYO). TYO seeks daily investment results before fees and expenses of 300% of the inverse (or opposite) of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.