10-Year Yield Below One-Year: Play Leveraged Bond ETFs
As flight-to-safety plays dominated global markets, the benchmark 10-year U.S. Treasury note yield slumped to 2.32%, down from 2.52% seen at the start of the month. Some key parts of the yield curve are inverted. The month of May has been all about trade war, which renewed threats of recession all over again.
It all started with the Trump administration raising tariffs on $200 billion worth of Chinese goods from 10% to 25% on May 10 and China announcing a retaliatory move —- a tariff hike on $60 billion worth American goods to 25%, starting Jun 1. President Donald Trump is also considering additional tariffs on an incremental $325 billion of Chinese imports (read: Full-Blown Trade Spat: 5 Most-Vulnerable Sector ETFs & Stocks).
Not only this, Washington has prohibited U.S. firms from doing business with Chinese giant Huawei, citing national security concerns. On May 23, the U.S. Commerce Department said that it was proposing a new rule to implement anti-subsidy duties on products from countries that undervalue their currencies against the U.S. dollar, another move that could undermine Chinese trade.
Fears for a prolonged trade war have raised concerns about an already softening global economy. As a result, the bond market is sending signals of a recession. The 10-year yield fell below that of the one-year (2.33% on May 24).
Since bond yields react negatively to the prices, treasury bond ETFs should rally ahead in anticipation of a slowing U.S. economy. As such, long-term Treasury bond ETFs are trending up in month and will likely continue to do so at least for the near term.
Below we highlight a few leveraged bond ETFs that could be gainful in the coming days (see: all Government Bond ETFs here).
Direxion Daily 20-Year Treasury Bull 3X (TMF) – Up 12.05 past month
The underlying ICE U.S. Treasury 20+ Year Bond 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. The fund’s expense ratio is 1.09% (read: Will 2019 See a Bull Market for Bond ETFs?).
ProShares Ultra 20+ Year Treasury (UBT) – Up 7.8% past month
The underlying ICE U.S. Treasury 20+ Year Bond Index includes publicly issued U.S. Treasury securities that have a remaining maturity greater than 20 years and have $300 million or more of outstanding face value, excluding amounts held by the Federal Reserve. The expense ratio is 0.95%.
Direxion Daily 7-10 Year Treasury Bull 3X (TYD) – Up 5.5% past month
The underlying ICE U.S. Treasury 7-10 Year Bond 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 ten years. The expense ratio is 1.10%.
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Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF): ETF Research Reports
ProShares Ultra 20+ Year Treasury (UBT): ETF Research Reports
Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD): ETF Research Reports
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