I keep seeing people pouring money blindly into TMF knowing that the Fed has very committed (and telegraphed) intention on keep raising rates that should guide bonds of all maturity dates going up, so price for bond ETFs going down making shorting these the sensible decision.
Yet I see very little people using this well known information (thanks FOMC) to their advantage and invest into TMV, which essentially shorts 20Y bonds. I'm a DCA fan myself for most part and mostly using TMV as a hedge/investment (50/50) but I also see lot of people switching to SQQQ (from TQQQ) while I see very little people switching from TMF to TMV.
Yes, the Fed rates are basically the overnight rates and don't directly affect longer maturity date rates, but with the Fed rates changing from 2.25% to 3% just the other day, and the Fed having the intention to go as high as 4.6% (with the current plan) for the end of 2023, I see TMF as throwing money to the firepit until we change to a more dovish scenario.
Yes, we've been having the yield curve well inverted for most of the year, and even so the 20Y bonds rate are just shy of 4%. I just don't see all rates not increasingly proportionally (ish) and hence TMV printing until the rates go down.
I will personally make the switch from TMV to TMF once the rates start going down but this just seems like as a safe bet as it can get.
Thoughts?
Submitted September 23, 2022 at 05:59AM by alvaroga91 https://ift.tt/d9LY5st
