Traders Love This Bearish Bond ETF

With the Federal Reserve having raised interest rates three times this year, many fixed income investors are departing long-dated bonds and the related exchange traded funds. Some traders are taking that concept to a more aggressive level by embracing leveraged bets against long-dated Treasuries.

The Direxion Daily 20+ Yr Treasury Bear 3X ETF (NYSEARCA: TMV) has recently been popular among risk-tolerant traders.

TMV seeks daily investment results that equal 300% of the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. TMV invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets . 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.

Loving TMV ETF

Rising market volatility and macro uncertainty can be a good reminder of why investors have looked to core fixed income to anchor their portfolios. The diversification potential of core bonds, as well as their risk-adjusted return potential, can help investors de-risk their equity exposure while potentially providing attractive returns.

TMV’s underlying index excludes securities such as “zero-coupon STRIPS, inflation linked securities, floating rate notes, cash management and Treasury bills, and any government agency debt issued with or without a government guarantee,” according to Direxion.

Data confirm that traders have recently been flocking to the bearish TMV. For the 30-day period ended Tuesday, Dec. 4, TMV averaged daily inflows of just over $800,000, according to Direxion data. During that period, TMV had the best inflows tally among all of Direxion’s inverse leveraged ETFs.

Still, some traders are not giving up on TMV’s bullish counterpart, the Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (NYSEArca: TMF). For the month ended Dec. 4, TMF average daily inflows north of $294,000, according to issuer data.

For more fixed income investment solutions, visit the Fixed Income Channel.