Investor focus is intensifying on the implications of 30-year Treasury bond yields approaching 5%, a level historically associated with stock market sell-offs due to the increased opportunity cost of holding equities. However, the more critical factor appears to be the relationship between real yields and inflation. Rising real yields, which provide stronger returns after adjusting for inflation, have been supporting equity markets and bolstering the US dollar by offering better real returns compared to other currencies. Conversely, if inflation begins to outpace the rise in Treasury yields, real yields could fall, potentially pressuring equities downward.
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 closely watched in this context. As of 17:40 on January 8, TMF is trading at $37.73, slightly down from its last close of $37.98, and near its 52-week low of $37.165. The ETF's performance reflects investor sentiment around long-term Treasury yields and their impact on broader market dynamics.