The upcoming week is set to be pivotal for the bond market, with key economic indicators such as tariffs, ISM surveys, and the US jobs report poised to influence long-term interest rates. Analysts anticipate that these data points will reflect a robust economy, potentially pushing back the first expected Federal Reserve rate cut to September due to rising inflationary pressures. The imposition of tariffs on consumer goods, food products, cars, and medical equipment could exacerbate cost pass-throughs, further fueling inflation expectations. Torsten Slok of Apollo Global predicts an upside in the ISM Manufacturing index, which could signal stronger GDP growth, aligning with the Atlanta Fed's optimistic GDPNow forecast.
These developments are likely to impact the demand for long-term bonds, such as the 30-year Treasury, as investors adjust their expectations for future rate cuts. A trifecta of inflation-enabling surprises could see the 30-year yield approach 5%, reflecting increased inflationary pressures and stronger economic data. This scenario would likely result in a sell-off in bond markets, as prices fall and yields rise, affecting ETFs like the Direxion Daily 20+ Year Treasury Bear 3X Shares (TMV), which aims to deliver triple the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index.
As of 15:11 on January 31, TMV is trading at $39.71, up from its last close of $38.81, with an intraday high of $39.77. The ETF's movement reflects market anticipation of higher long-term yields amid potential inflationary pressures and delayed rate cuts.