The Treasury market is grappling with inflationary pressures as recent economic data reveals a surge in job openings and higher prices, challenging the outlook for rate cuts. The ISM Services survey and JOLTS data indicate robust employment and inflationary undertones, suggesting that the Federal Reserve may delay anticipated rate cuts. This environment has led to increased term premiums, with the 10-year term premium reaching its highest level since 2015, as investors demand greater compensation for holding long-dated debt amid rising inflation expectations and increased Treasury supply.
The Direxion Daily 20+ Year Treasury Bull 3X Shares ETF (TMF), which aims to deliver triple the daily performance of the ICE U.S. Treasury 20+ Year Bond Index, is feeling the impact of these market dynamics. As inflation expectations rise and the supply of Treasury bonds increases to cover large deficits, yields on long-dated securities are under upward pressure, affecting leveraged ETFs like TMF that are sensitive to interest rate movements.
As of 06:43 on January 8, TMF is trading at $37.64, slightly below its last close of $37.98, and near its 52-week low of $37.78. The ETF's performance reflects the broader challenges in the Treasury market, as investors adjust to the potential for prolonged inflation and delayed rate cuts.