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Yields Continue to Fall After Q2 GDP Contraction

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The downward spiral of yields in 2020 keeps on continuing as the gross domestic product (GDP) fell by a whopping 32.9% during the second quarter as the Covid-19 pandemic put a stranglehold on the economy. One redeeming quality was that the number was less than the 34.7% decline expected by economists surveyed by Dow Jones.

Per a CNBC report, Thursday’s trading session saw the “yield on the benchmark 10-year Treasury note fell 3 basis points to around 0.54%, marking the first time the benchmark rate has traded below the 0.55% threshold in more than three months. The yield on the 30-year Treasury bond was also down 5 basis points at 1.19%. Yields move inversely to prices.”

“It’s been long known that Q2 growth was abysmal, a fact confirmed this morning without spurring equally compelling price action,” Jon Hill, BMO’s U.S. rates strategist, said in a note. “The resulting net price action was an intuitive bull-flattening of the Treasury yield curve.”

US Real GDP Growth Chart

US Real GDP Growth data by YCharts

4 Ways to Trade Treasurys with Leverage

Investors salivating at an opportunity to trade Treasurys can look at these four leveraged ETFs to trade:

  1. Direxion Daily 20+ Year Treasury Bull 3X Shares (NYSEArca: TMF): seeks daily investment results, before fees and expenses, of 300% of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. The index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than 20 years.
  2. Direxion Daily 20+ Year Treasury Bear 3X ETF (NYSEArca: TMV): seeks daily investment results before fees and expenses of 300% of the inverse (or opposite) of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index. The index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than 20 years.
  3. Direxion Daily 7-10 Year Treasury Bull 3X Shares (NYSEArca: TYD): seeks daily investment results, before fees and expenses, of 300% of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index. The index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than seven years and less than or equal to ten years.
  4. Direxion Daily 7-10 Year Treasury Bear 3X Shares (NYSEArca: TYO): seeks daily investment results before fees and expenses of 300% of the inverse (or opposite) of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index. The index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than seven years and less than or equal to ten years.

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