Direxion daily 20 year treasury bull 3x - Revision history

>Dk0709 at 12:49, 24 July 2023

2023-07-24T12:49:23Z

← Older revision		Revision as of 13:49, 24 July 2023
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	{{Infobox company		{{Infobox company
	\| name = Direxion 20 year+ Treasury Bull 3x ETF		\| name = Direxion 20 year+ Treasury Bull 3x ETF
	~~\| logo = Direxion.svg~~
	\| trade_name = TMF		\| trade_name = TMF
	\| type = 3x Leveraged ETF		\| type = 3x Leveraged ETF
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	== Current Holdings ==		== Current Holdings ==
	{\| class="wikitable"		{\| class="wikitable"
	\|+TMF - Portfolio (as of 20/07/2023)[[File:10.jpg\|left\|thumb\|~~434x434px~~\|TMF Holdings<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>]]		\|+TMF - Portfolio (as of 20/07/2023)[[File:10.jpg\|left\|thumb\|552x552px\|TMF Holdings<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>]]
	!Security Description		!Security Description
	!Ticker		!Ticker

>Dk0709 at 12:48, 24 July 2023

2023-07-24T12:48:04Z

← Older revision		Revision as of 13:48, 24 July 2023
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	(as of 22/07/2022)}}		(as of 22/07/2022)}}
	[[File:2023-07-20 152553.png\|thumb\|Direxion ETF<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>]]		[[File:2023-07-20 152553.png\|thumb\|Direxion ETF<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>]]

			== Overview ==
	The Direxion Daily 20+ Year Treasury Bull & Bear 3X Shares seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the ICE U.S. Treasury 20+ Year Bond Index.<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref> The purpose of this product is to provide exposure to the rising Treasury bond prices to profit during a recessionary period, where tightened credit market becomes unsustainable and forces the federal funds to taper its implemented monetary policy.		The Direxion Daily 20+ Year Treasury Bull & Bear 3X Shares seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the ICE U.S. Treasury 20+ Year Bond Index.<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref> The purpose of this product is to provide exposure to the rising Treasury bond prices to profit during a recessionary period, where tightened credit market becomes unsustainable and forces the federal funds to taper its implemented monetary policy.

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	=== Inflation ===		=== Inflation ===
	[[File:Inflation.jpg\|thumb\|~~inflation~~<ref>https://internationalfinance.com/top-reasons-for-inflation/</ref>]]		[[File:Inflation.jpg\|thumb\|Inflation picture<ref>https://internationalfinance.com/top-reasons-for-inflation/</ref>]]
	Increasing inflation diminishes the value of bond's future cash flows. As occurred in 2022, if a bond has a coupon rate of 3% and inflation rate (Consumer Price Index) is at 9%, real yield of that particular bond is -6%. This again is correlated to the Federal Reserve's monetary policy as the interest rates will rise in order to bring down inflation. Therefore higher inflation leads to higher interest rates, higher yields will be demanded by investors which brings to bond prices down.		Increasing inflation diminishes the value of bond's future cash flows. As occurred in 2022, if a bond has a coupon rate of 3% and inflation rate (Consumer Price Index) is at 9%, real yield of that particular bond is -6%. This again is correlated to the Federal Reserve's monetary policy as the interest rates will rise in order to bring down inflation. Therefore higher inflation leads to higher interest rates, higher yields will be demanded by investors which brings to bond prices down.

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	The upward trend in delinquency rates on credit card debt typically indicate the beginning of a recession, which was evident in 2000 dot-com crash, 2008 financial crisis and 2020 Covid pandemic. Rapid decrease in delinquency rates after the start of a recession was due to the financial aid or a "bail-out" by the federal reserve by implementing QE and rate cuts to revive the economy. Another upward trend in delinquency rates can be observed from 2021 which may signal the start of a recessionary period in the near future.		The upward trend in delinquency rates on credit card debt typically indicate the beginning of a recession, which was evident in 2000 dot-com crash, 2008 financial crisis and 2020 Covid pandemic. Rapid decrease in delinquency rates after the start of a recession was due to the financial aid or a "bail-out" by the federal reserve by implementing QE and rate cuts to revive the economy. Another upward trend in delinquency rates can be observed from 2021 which may signal the start of a recessionary period in the near future.

	[[File:Debt ~~delinquency11~~.jpg\|credit card debt<ref>https://fred.stlouisfed.org/series/CCLACBW027SBOG</ref>personal savings rate<ref>https://fred.stlouisfed.org/series/PSAVERT</ref>]]		[[File:Debt delinquency123.jpg\|credit card debt<ref>https://fred.stlouisfed.org/series/CCLACBW027SBOG</ref>personal savings rate<ref>https://fred.stlouisfed.org/series/PSAVERT</ref>]]

	US personal savings rate is hovering near the lowest level, with the highest debt level and rising delinquency rates while consumer spending remains resilient. This raises concerns and risks in the US economy as the ability to pay back the loans remains questionable. Rising delinquency rates typically leads to rising default rates on those loans, leading to a struggling economy which has a positive effect on the performance of TMF.		US personal savings rate is hovering near the lowest level, with the highest debt level and rising delinquency rates while consumer spending remains resilient. This raises concerns and risks in the US economy as the ability to pay back the loans remains questionable. Rising delinquency rates typically leads to rising default rates on those loans, leading to a struggling economy which has a positive effect on the performance of TMF.

	=== Commercial Real Estate ===		=== Commercial Real Estate ===
	[[File:Skycrapers-of-Commercial-real-estate.jpg\|thumb\|~~office cre~~ buildings<ref>https://www.adventuresincre.com/careers-in-real-estate/</ref>]]		[[File:Skycrapers-of-Commercial-real-estate.jpg\|thumb\|Office buildings in Commercial Real Estate<ref>https://www.adventuresincre.com/careers-in-real-estate/</ref>]]
	Small businesses are in the epicentre of the economic damage from tightened monetary policy. Small business rent delinquency rates have reached 40% in the United States in June, equalling April's record data.<ref>https://thehill.com/business/4073250-small-businesses-struggling-to-make-rent-report/</ref> Businesses struggling to pay rent may have to reduce and minimise their expenses which are evident in mass layoffs in the economy.<ref>https://www.businessinsider.com/layoffs-sweeping-the-us-these-are-the-companies-making-cuts-2023</ref>		Small businesses are in the epicentre of the economic damage from tightened monetary policy. Small business rent delinquency rates have reached 40% in the United States in June, equalling April's record data.<ref>https://thehill.com/business/4073250-small-businesses-struggling-to-make-rent-report/</ref> Businesses struggling to pay rent may have to reduce and minimise their expenses which are evident in mass layoffs in the economy.<ref>https://www.businessinsider.com/layoffs-sweeping-the-us-these-are-the-companies-making-cuts-2023</ref>

>Dk0709: /* The idea */

2023-07-23T14:07:44Z

The idea

← Older revision		Revision as of 15:07, 23 July 2023
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	== The idea ==		== The idea ==
	TMF offers a powerful instrument for investors with a bullish outlook on US 20+ years Treasury bonds. In a form of leveraged ETF, TMF allow investors to take advantage of the deterioriatng economy by betting on long term Treasury yields to fall, mainly caused by the US interest rate cuts in an adverse scenario.<ref>https://etfdb.com/etf/TMF/#etf-ticker-profile</ref> TMF was founded by Direxion along with 133 other ETFs that were launched in 2009, in order to provide leverage and hedge against a certain position or a sector for improved risk management, following the 2008 Financial Crisis.<ref>https://www.plansponsor.com/etfs-continue-growth-in-2009/</ref>		TMF offers a powerful instrument for investors with a bullish outlook on US 20+ years Treasury bonds. In a form of leveraged ETF, TMF allow investors to take advantage of the deterioriatng economy by betting on long term Treasury yields to fall, mainly caused by the US interest rate cuts in an adverse economic scenario.<ref>https://etfdb.com/etf/TMF/#etf-ticker-profile</ref> TMF was founded by Direxion along with 133 other ETFs that were launched in 2009, in order to provide leverage and hedge against a certain position or a sector for improved risk management, following the 2008 Financial Crisis.<ref>https://www.plansponsor.com/etfs-continue-growth-in-2009/</ref>
	{\| class="wikitable"		{\| class="wikitable"
	\|+TMF - main financials<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>		\|+TMF - main financials<ref>https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs</ref>

>Dk0709: /* Bear Case */

2023-07-23T14:05:13Z

Bear Case

← Older revision		Revision as of 15:05, 23 July 2023
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	=== Bear Case ===		=== Bear Case ===
	In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points ~~hike~~. Economy remains resilient and has enough strength to withstand tightened credit ~~condition~~. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>		In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points hikes, in July and September FOMC. Economy remains resilient and has enough strength to withstand tightened credit conditions. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>

	[[File:Bear.png\|Bear case graph]]		[[File:Bear.png\|Bear case graph]]

>Dk0709 at 14:03, 23 July 2023

2023-07-23T14:03:14Z

← Older revision		Revision as of 15:03, 23 July 2023
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	== Projection ==		== Projection ==
	The nature of leveraged ETFs make the forecast of the performance challenging, however trends can be identified and ~~manipulated~~ to ~~evaluate a reasonable range of price target based on economic fundamentals~~. Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.		The nature of leveraged ETFs make the forecast of the performance extremely challenging and inaccurate, however economic trends can be identified based on past performances and used to project future performances. Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.

	=== Bear Case ===		=== Bear Case ===

>Dk0709 at 13:59, 23 July 2023

2023-07-23T13:59:51Z

← Older revision		Revision as of 14:59, 23 July 2023
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	== Projection ==		== Projection ==
	Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.		The nature of leveraged ETFs make the forecast of the performance challenging, however trends can be identified and manipulated to evaluate a reasonable range of price target based on economic fundamentals. Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.

	=== Bear Case ===		=== Bear Case ===

>Dk0709 at 13:45, 23 July 2023

2023-07-23T13:45:36Z

← Older revision		Revision as of 14:45, 23 July 2023
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	== Projection ==		== Projection ==
	Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.		Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.

	~~[[File:Bear.png\|Bear case graph]]~~

	=== Bear Case ===		=== Bear Case ===
	In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points hike. Economy remains resilient and has enough strength to withstand tightened credit condition. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>		In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points hike. Economy remains resilient and has enough strength to withstand tightened credit condition. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>

	[[File:~~Tmfbase11~~.png\|~~Base~~ case graph]]		[[File:Bear.png\|Bear case graph]]

	=== Base Case ===		=== Base Case ===
	This scenario refers to the general consensus of the market. According to CNBC research, market sees the interest rates decreased to 3% by 2025 after peaking in September 2023 with 5.50%. TMF historically performs in the range between $20 and $25 with these rate cuts, which provide 165% to 229% upside potential.<ref>[https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth. https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth.]</ref> However, the pace of rate cuts need to be considered as well as incoming economic data to determine the projection on TMF. Rate cuts may indicate a soft landing with a mild technical recession to bring inflation down to 2% while having a minimal impact on the labour market.		This scenario refers to the general consensus of the market. According to CNBC research, market sees the interest rates decreased to 3% by 2025 after peaking in September 2023 with 5.50%. TMF historically performs in the range between $20 and $25 with these rate cuts, which provide 165% to 229% upside potential.<ref>[https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth. https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth.]</ref> However, the pace of rate cuts need to be considered as well as incoming economic data to determine the projection on TMF. Rate cuts may indicate a soft landing with a mild technical recession to bring inflation down to 2% while having a minimal impact on the labour market.

	[[File:~~Tmfbull2~~.png\|~~Bull~~ case graph]]		[[File:Tmfbase11.png\|Base case graph]]

	=== Bull Case ===		=== Bull Case ===
	This case refers to the severely adverse scenario as indicated by the federal reserve bank stress test, where the economy undergoes a severe economic recession forcing the interest rates to near zero level. Although the likelihood of this case is not the highest, this scenario appears to be similar with 2020 Covid crash, where the significant QE and rate cuts were observed allowing TMF to reach above $45 with 497% upside from current price.		This case refers to the severely adverse scenario as indicated by the federal reserve bank stress test, where the economy undergoes a severe economic recession forcing the interest rates to near zero level. Although the likelihood of this case is not the highest, this scenario appears to be similar with 2020 Covid crash, where the significant QE and rate cuts were observed allowing TMF to reach above $45 with 497% upside from current price.[[File:Tmfbull2.png\|Bull case graph]]

	== Risk assessment ==		== Risk assessment ==

>Dk0709 at 13:43, 23 July 2023

2023-07-23T13:43:28Z

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	\|		\|
	\|Short Swap		\|Short Swap
	\| -3.83 ~~(short~~)		\| (3.83)
	\|-		\|-
	\|Cash and cash equivalent		\|Cash and cash equivalent

95.149.161.164: /* Inverted Yield Curve */

2023-07-23T13:40:25Z

Inverted Yield Curve

← Older revision		Revision as of 14:40, 23 July 2023
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	==== Inverted Yield Curve ====		==== Inverted Yield Curve ====
	[[File:T210.jpg~~\|thumb\|464x464px~~\|2 year treasury yield minus 10 year treasury yield data<ref>https://fred.stlouisfed.org/series/T10Y2Y</ref>]]		[[File:T210.jpg\|2 year treasury yield minus 10 year treasury yield data<ref>https://fred.stlouisfed.org/series/T10Y2Y</ref>]]

	Treasury bonds with longer maturity date typically has a higher yield, as it has increased economic uncertainty and devaluation with rising annual inflation. However when shorter bonds have a higher yield than long term bonds, it is described as a yield curve inversion. This inversion is most commonly measured by 2 year yield minus 10 year yield. When this metric dips below 0 basis point, it accurately predicted every recession in the last half century thus regarded as an accurate indicator of a recession. Historically it required 6 to 18 months since the inversion for the recession to occur. It's recognised as a reliable recession indicator as it illustrates the shortage of money supply in the near term, which indicate the economic turmoil.		Treasury bonds with longer maturity date typically has a higher yield, as it has increased economic uncertainty and devaluation with rising annual inflation. However when shorter bonds have a higher yield than long term bonds, it is described as a yield curve inversion. This inversion is most commonly measured by 2 year yield minus 10 year yield. When this metric dips below 0 basis point, it accurately predicted every recession in the last half century thus regarded as an accurate indicator of a recession. Historically it required 6 to 18 months since the inversion for the recession to occur. It's recognised as a reliable recession indicator as it illustrates the shortage of money supply in the near term, which indicate the economic turmoil.

95.149.161.164: /* Projection */

2023-07-23T13:39:56Z

Projection

← Older revision		Revision as of 14:39, 23 July 2023
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	== Projection ==		== Projection ==
	Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.		Three different cases were evaluated for the projection of TMF performance. Bull case refers to the catastrophic economic conditions with a severe recession, providing bullish conditions for TMF and vice versa.
	[[File:Bear.png~~\|thumb\|323x323px~~\|Bear case graph]]
			[[File:Bear.png\|Bear case graph]]

	=== Bear Case ===		=== Bear Case ===
	In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points hike. Economy remains resilient and has enough strength to withstand tightened credit condition. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>		In this scenario, the Federal Reserve will hike the interest rates up to 5.50 ~ 5.75 with two more 25 basis points hike. Economy remains resilient and has enough strength to withstand tightened credit condition. The federal reserve is likely to hold the rates until Q3 2024 as stated by their chairman Jerome Powell, and performance of TMF will struggle to see the upside in the next few years. <ref>https://www.usatoday.com/story/money/2023/06/16/when-will-the-fed-cut-interest-rates-2023/70330336007/</ref>

	[[File:Tmfbase11.png~~\|thumb\|321x321px~~\|Base case graph]]		[[File:Tmfbase11.png\|Base case graph]]

	=== Base Case ===		=== Base Case ===
	This scenario refers to the general consensus of the market. According to CNBC research, market sees the interest rates decreased to 3% by 2025 after peaking in September 2023 with 5.50%. TMF historically performs in the range between $20 and $25 with these rate cuts, which provide 165% to 229% upside potential.<ref>[https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth. https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth.]</ref> However, the pace of rate cuts need to be considered as well as incoming economic data to determine the projection on TMF. Rate cuts may indicate a soft landing with a mild technical recession to bring inflation down to 2% while having a minimal impact on the labour market.		This scenario refers to the general consensus of the market. According to CNBC research, market sees the interest rates decreased to 3% by 2025 after peaking in September 2023 with 5.50%. TMF historically performs in the range between $20 and $25 with these rate cuts, which provide 165% to 229% upside potential.<ref>[https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth. https://www.cnbc.com/2023/06/14/the-fed-forecasts-two-more-hikes-this-year-taking-rates-as-high-as-5point6percent.html#:~:text=The%20central%20bank%20also%20hiked,their%20expectations%20for%20economic%20growth.]</ref> However, the pace of rate cuts need to be considered as well as incoming economic data to determine the projection on TMF. Rate cuts may indicate a soft landing with a mild technical recession to bring inflation down to 2% while having a minimal impact on the labour market.

			[[File:Tmfbull2.png\|Bull case graph]]
	[[File:Tmfbull2.png~~\|thumb\|325x325px~~\|Bull case graph]]

	=== Bull Case ===		=== Bull Case ===
	This case refers to the severely adverse scenario as indicated by the federal reserve bank stress test, where the economy undergoes a severe economic recession forcing the interest rates to near zero level. Although the likelihood of this case is not the highest, this scenario appears to be similar with 2020 Covid crash, where the significant QE and rate cuts were observed allowing TMF to reach above $45 with 497% upside from current price.		This case refers to the severely adverse scenario as indicated by the federal reserve bank stress test, where the economy undergoes a severe economic recession forcing the interest rates to near zero level. Although the likelihood of this case is not the highest, this scenario appears to be similar with 2020 Covid crash, where the significant QE and rate cuts were observed allowing TMF to reach above $45 with 497% upside from current price.


	== Risk assessment ==		== Risk assessment ==