Market Overview

Flight To Safety Lifts This Leveraged ETF

Flight To Safety Lifts This Leveraged ETF

It is all but official that the bull market that was born in March 2009 is either running on fumes or essentially over. Increasing fears that a global bear market is on the horizon are prompting investors to embrace safer assets.

Despite rising interest rates in the U.S., the flight to safety has some market participants embracing longer-dated U.S. Treasuries.

What Happened

Traders renewed affinity for rate-sensitive longer-dated Treasuries has some aggressive traders flocking to the Direxion Daily 20+ Year Treasury Bull 3X Shares (NYSE: TMF). That triple-levergaed exchange traded fund is designed to deliver triple the daily returns of the ICE U.S. Treasury 20+ Year Bond Index (IDCOT20TR).

“Eligible securities must be fixed rate, denominated in U.S. dollars, and have $300 million or more of outstanding face value, excluding amounts held by the Federal Reserve. Securities excluded from the Index are zero-coupon STRIPS, inflation linked securities, floating rate notes, cash management and Treasury bills, and any government agency debt issued with or without a government guarantee,” according to Direxion.

Why It's Important

TMF is up more than 18 percent on a month-to-date basis, making it the third-best leveraged bullish fund in Direxion's stable.

TMF's underlying index has a duration of 17.93 years and its components have a weighted average maturity of 26.53 years, meaning the benchmark is sensitive to rising Treasury yields. More than 79 percent of the benchmark's holdings have maturities ranging from 24 to 30 years.

Leveraged ETFs, even fixed income funds, can be volatile instruments, but TMF is less volatile than the typical leveraged ETF. Over the past month, only one of Direxion's leveraged ETFs, another bond ETF, has been less volatile than TMF, according to issuer data.

What's Next

On Monday, TMF hauled in $3.83 million, a total surpassed by just seven other Direxion leveraged bull funds. TMF has seen fourth-quarter outflows of almost $14 million.

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