The bond market is currently experiencing a notable steepening trend, driven by a widening spread between two-year and ten-year Treasury yields, which reached 39.6 basis points, the widest since May 2022. This trend reflects investor expectations of future inflation and economic growth, prompting a preference for shorter-dated bonds over longer-term ones. The increased issuance of corporate bonds in January has further contributed to this dynamic, as investors lock in rates and sell existing bonds to accommodate new supply. Additionally, the upcoming $22 billion supply of 30-year Treasury bonds poses a challenge, potentially requiring higher concessions to attract buyers due to rising term premiums and inflationary pressures.
The Direxion Daily 20+ Year Treasury Bear 3X Shares ETF (TMV), which aims to deliver triple the inverse performance of the ICE U.S. Treasury 20+ Year Bond Index, is positioned to benefit from this steepening trend. As long-term bond yields rise, TMV provides an opportunity for investors to capitalize on declining bond prices. The ETF's current price stands at $42.25 as of 06:54 on January 8, nearing its 52-week high of $42.32, reflecting the ongoing market dynamics and investor sentiment towards higher yields.