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As Yields Rise and Fall, Keep These ETFs Handy
When it comes to short-term trading opportunities, stocks are certainly not the only game in town, especially with the way the debt market has seen its fair share of volatility. As government bond yields rise and fall, it can help to keep strategic leverage exchange traded funds (ETFs) handy to extract profits.
As Yields Fluctuate Up and Down, Don't Forget These 2 ETFs
As Treasury yields continue to fluctuate amid the volatility that's been tied to inflation fears, traders can benefit from the market movements whether yields are up or down with Direxion Investments' leveraged exchange traded products. “This is all about concern about a recession.
TMF Has Been Profitable During Equity Markets Corrections - Not In 2021-2022
All Treasury Bond ETFs are, on the average, negatively correlated to the US equities and are suitable as capital protection during market corrections. TMF, a 3X leveraged 20+ Year Treasury Bond ETF was very profitable until 2020 but was underperforming in 2021-22.
3X Tech ETF Pulls In Billions Amid Head Winds
What's compelling investors to buy such a sharp dip?
TMF: This Minimalist Portfolio Could Turn $25,000 Into $1 Million In 25 Years
An underappreciated ETF like the Direxion Daily 20+ Year Treasury Bull 3X Shares could be useful in creating substantial value in the long term. Superior results could come from simply combining two funds and rebalancing, rather than from overcomplicated investment strategies.
Rates Outlook: Swap Spreads To See Widening Pressure
While there is upward pressure on market rates in 2022, it's not coming from higher net supply. In fact, lower net supply can help to richen government bonds. On top of that, we should see flatter curves over the whole of 2022. We also anticipate some upward pressure on USD Libor.
Mind The Bond Market
The deficit spending that supported the economy in 2020 is showing up in hot inflation numbers in 2021. While I think the inflation numbers will get better in 2022, I do not believe they will get back to pre-pandemic levels because of owners' equivalent rents and wage gains in the CPI.
Tapering Impact On Treasury Supply
At the November FOMC meeting, the Fed officially announced that it would begin tapering its bond purchase program, starting in mid-November. When the Fed began tapering its QE3 program over the course of 2014, the coupon supply from the U.S. Treasury was stable, leading to an increase in net supply takedown from the private market.
Inflation Expectations Come Unanchored
Inflation expectation is a key metric the Fed watches closely. Housing costs - based on different measures of rents - account for one-third of CPI.
Federal Reserve Watch: Fed Keeps Reserves Into Commercial Banks
The commercial banking system now maintains the largest amount of reserve balances it has ever held, thanks to the effort of the Federal Reserve System. Because of this liquidity in the banks, short-term interest rates are threatening to fall into negative territory and have not because the Fed sold $1.2 trillion in reverse repurchase agreements.