Rising inflation pressures, as highlighted by recent PCE, CPI, and PPI reports, are keeping long-dated bond yields elevated, challenging the bond market's expectations of a potential Fed rate cut in June. The latest PCE report showed an increase in the Fed's preferred inflation measure to 2.6% from 2.4%, with core inflation steady at 2.8%. This follows earlier reports of CPI rising to 2.9% and PPI reaching 3.3%, all well above the Fed's 2% target. "The narrative that the economy is slowing and inflation is moving down to 2% is wrong," said Torsten Slok, Chief Economist at Apollo Global, emphasizing the strength of the US economy.
The ProShares UltraPro Short 20+ Year Treasury ETF (TMV), which aims to deliver triple the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index, is influenced by these inflationary trends. As inflation expectations rise, the attractiveness of long-term bonds diminishes, prompting investors to sell, which in turn elevates yields. This environment supports the strategy of TMV, as higher yields typically benefit inverse bond ETFs.
As of 09:31 on January 31, TMV is trading at $38.67, slightly down from its last close of $38.81. The ETF opened at $38.66, with an intraday high of $38.74 and a low of $38.67, reflecting the ongoing market adjustments to inflation data and expectations.