TBT ETF

The ProShares UltraShort 20+ Year Treasury ETF offers leveraged inverse exposure to long-term U.S. Treasury bonds, aiming for -2x daily performance of the ICE U.S. Treasury 20+ Year Bond Index. The TBT ETF's strategy involves short positions in U.S. Treasury futures and swaps with various banks, providing inverse exposure while mitigating counterparty risk. TBT stands out among inverse Treasury ETFs due to its -2x leverage, balancing risk and caution, with better liquidity and narrower bid-ask spreads.

The Fed's shift to a more accommodative monetary policy may not guarantee a bond market rally due to high U.S. debt and declining foreign demand. The U.S. dollar's faltering reserve currency status and political division further erode confidence in U.S. government bonds, increasing borrowing costs. ProShares UltraShort 20+ Year Treasury ETF offers a leveraged bearish bet on bonds, benefiting from potential declines in long-term U.S. Treasury bonds.

TBT remains a Buy as the bond market shows downward momentum, and there are likely more advances in store for TBT price and volume. The effects of the global pandemic regime have produced a strong Fed pivot that will likely reverberate through markets for some time. Technical analysis suggests a new bull market for TBT, while fundamental analysis indicates that the high rate of core inflation should result in higher trading prices of this instrument.

The Treasury term premium is back above zero, indicating that investors are demanding higher yields for long-dated Treasuries. The ProShares UltraShort 20+ Year Treasury ETF is recommended for short-term trading due to its leverage and momentum characteristics. Yields may continue to rise, benefiting TBT, as factors such as reduced Treasury holdings by Japan and China and quantitative tightening by the Fed impact the market.

Financial systems are shaking all around the world. I expect the processes to accelerate in the second half of this year due to liquidity withdrawals and a greater sense of pressure from high rates in the system. I would not use TBT as a hedge anymore.

The Federal Reserve's dovish stance and economic indicators suggest that unemployment is rising close to where it should be and inflation is falling. TBT, a high duration ETF sensitive to market interest rates, is likely to depreciate in the near future due to the changing macroeconomic landscape. Investors should focus on quality growth stocks at good valuations and consider closing out TBT trades.