I'm interested in gambling a few thousand on TMF, a triple-leveraged 20+ year bond fund. It tracks the daily returns of the ICE US Treasury 20+ Year Bond Index.

If the Fed neither raises nor lowers rates come Nov 1st (ie, it keeps them at current levels), what effect would this have on such a fund/index. Would it do anything at all?

1 Answer 1


No one can say for certain, since long-term interest rates are essentially the market's projection of what short-term rates will do over that time. So even if short-term rates don't move, the performance of the fund is still based on the market's expectations over the next 20 years, which could go up or down regardless of actual short-term rate changes.

If the market expects short-term rates to go up but they don't, then the most probable outcome is that this ETF will go up (rates rising less than expected will increase bond values, all else being equal), but nothing is guaranteed by any means.

If you want to "gamble" as a learning exercise, that's fine, but as with any risky investment, don't gamble more than you can afford to lose, have proper downside protection in place, etc.

Also note that leveraged funds don't necessarily track over longer periods of time, especially when there are downward movements, as downward movements are much harder to recover from in a leveraged ETF.

  • I have a related question based on your statement that "long term rates are market projections based on short term rates". Basically, aren't the coupon rates for LTTs (long term treasuries) the exact same as what they are for T Bills & T Notes? In that case, how is it even possible to have an inverted yield curve (the yield on a longer term treasury should always be higher given the exact same coupon)? I'm guessing this has something to do with bonds' capital appreciation on the second hand market.
    – Enter4343
    Oct 25, 2023 at 1:27
  • @Enter4343 t bills don't pay a coupon and in most cases t bonds pay a higher rate than t notes, it's reversed now because short term rates are higher than the expectation for long term rates.
    – jesse_b
    Oct 25, 2023 at 12:32
  • "aren't the coupon rates for LTTs (long term treasuries) the exact same as what they are for T Bills & T Notes" No - the coupon is set at issue and is different for different maturities. But coupon isn't as important as yield which changes continuously. An inverted curve means the yield for shorter bonds is higher, regardless of coupon.
    – D Stanley
    Oct 25, 2023 at 13:33
  • I've spent a few days thinking about your comments, and I think I get it now: People are demanding higher yields for LTTs these days due to the increased risk associated with uncertain interest rates. What I still don't understand is, if yields on LTTs have been going up the past year, why has the 20+ Bond Index continued to go down? Yields may have gone down from the perspective of bond SELLERS but not from the perspective of bond BUYERS.
    – Enter4343
    Nov 6, 2023 at 11:36
  • I don't understand your last sentence (there are not separate yields for buyers and sellers other than due to bid/ask spread), but for the question about the index, when yield go up, prices go down (you can buy a bond for cheaper and make a better "yield". That is why the Bond Index has gone down. If you own a bond with a fixed interest rate and interest rates go up, your bond is worth less. The index is tracking the prices of bonds, which are inversely proportional to yields.
    – D Stanley
    Nov 7, 2023 at 14:21

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