Bond investors are increasingly betting on a continued steepening of the yield curve, with the 2s10s spread nearing a three-year high. This trend reflects expectations of future economic growth and inflation, as short-term yields decrease relative to long-term yields. Non-US investors are showing interest in steepener trades, capitalizing on potential policy shifts and economic outlooks. The sales of long-end bonds, such as 20s and 30s, are contributing to higher long-term yields, further widening the curve.
The upcoming Federal Open Market Committee (FOMC) meeting is also influencing market dynamics, as investors anticipate a potential pause in rate hikes. This expectation is driven by a robust labor market and inflation not yet reaching the Fed's 2% target. As a result, short-term yields may decrease, reinforcing the steepening trend.
The Direxion Daily 20+ Year Treasury Bear 3X Shares ETF (TMV), which aims to provide triple the inverse exposure to the daily performance of the ICE U.S. Treasury 20+ Year Bond Index, is currently trading at $40.56 as of 10:47 on January 24. This marks a slight decline from its last close of $40.70, with an intraday high of $41.09.