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Fresh services and manufacturing sector data out Wednesday stoked concern that the Federal Reserve may have no choice but to raise interest rates one more time before the end of this year, sending 10-year Treasury yields north of 5% for the first time since 2007.
Make no bones about it, because Federal Reserve Chair Kevin Warsh isn't: Inflation is too high. The Fed leader confirmed as much following the central bank's 25-basis-point interest rate increase on Wednesday, September 16.
Guessing what the Federal Reserve is going to do next is an increasingly difficult task. For some time, the war in Iran bolstered the possibility that the central bank would have to raise rates at some point this year to damp inflation.
Direxion Daily 7-10 Year Treasury Bull 3x Shares (NYSEARCA:TYD - Get Free Report) was the recipient of a large increase in short interest during the month of March. As of March 31st, there was short interest totaling 16,734 shares, an increase of 30.2% from the March 15th total of 12,850 shares. Based on an average
May's inflation data could bring Treasury bulls back into the fray. If the Fed has the signal they need to start easing monetary policy, then it could bring up the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) and the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD).
Tariffs are roiling the major stock market indexes with volatility. So investors have been pouring into bonds to escape the turmoil.
With the path to rate cuts clearer, Treasury bonds have been heading higher since the start of the summer, but they've taken a turn. The return of rising yields have been putting the Direxion Daily 20+ Yr Trsy Bear 3X ETF (TMV) and the Direxion Daily 7-10 Year Treasury Bear 3X Shares (TYO) back into positive territory.
As the U.S. Federal Reserve starts to ease monetary policy, the yield curve is starting to steepen after a couple of years inverted. In turn, this is pushing a pair of leveraged exchange traded funds (ETFs) from Direxion higher.