The current market environment is characterized by a preference for shorter-dated bonds, as investors navigate inflation concerns and a robust corporate bond issuance season. This trend has led to a steepening of the yield curve, with the spread between two-year and ten-year Treasury yields reaching its widest point since May 2022. The increased issuance of corporate bonds in January has surpassed dealer estimates, necessitating rate locking and the selling of existing bonds to accommodate new supply. This dynamic is further compounded by the anticipation of the first rate cut being pushed to July 2025, which has influenced demand and yields across different bond maturities.
The Direxion Daily 20+ Year Treasury Bull 3X Shares ETF (TMF), which aims to provide triple the daily performance of the ICE U.S. Treasury 20+ Year Bond Index, is impacted by these market movements. As investors continue to sell longer-duration bonds, driving yields higher, the ETF faces pressure from rising term premiums and the broader trend of yield curve steepening.
As of 06:54 on January 8, TMF is trading at $37.61, slightly below its last close of $37.98, and near its 52-week low of $37.78. The ETF's performance reflects the ongoing challenges in the bond market, driven by cyclical and seasonal factors that contribute to yield volatility.