People that piled into long-term Treasuries searching for more
yield can't say they weren't warned.
"Treasury 10-year notes should yield 3.50% based on growth
and inflation forecasts and the impact of the Federal Reserve's
asset-purchase program, instead of today's 2.78 percent, JPMorgan
executives said in a presentation in London. Benchmark German
bund yields should be at 2.20%, versus 1.72%, while
similar-maturity U.K. gilts should yield 3.30% instead of 2.82%,
the company said."
The 10-year U.S. Treasury yield (^TNX) has soared 72.57% over
the past year toward 2.84%, while the price of 7-10 year U.S.
Treasury ETFs (NYSEARCA:IEF) has declined 6.93% over that same
Another 0.66% rise in yields toward 3.5% as JPMorgan projects
would mean serious financial damage for the Federal Reserve and its
$2.13 trillion in Treasury holdings along with other Treasury bond
U.S. Treasuries with longer maturities (NYSEARCA:TLT) of 20
years or more have fallen harder versus 10-year bonds over the past
year, declining 17.28%. At that rate (pun intended), official bear
market territory of 20% plus losses should be a cinch. How should
bond vigilantes be positioned?
The right side of the trade in the bond market has been short or
inverse ETFs that move in the opposite direction of prices for
Treasuries. These types of bond ETFs - especially funds
concentrated on the long-end of the yield curve - continue to rack
up big gains.
The Direxion Daily 30-Yr Treasury Bear 3x Shares (NYSEARCA:TMV)
is up 41.22% and the ProShares UltraShort 20+ Yr (NYSEARCA:TBT) is
ahead 29.40% over the past year. TMV aims for 300% daily inverse
performance to long-term Treasuries whereas TBT does that same
thing but with 200% leverage.
Profit Strategy Newsletter
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