If it was a Treasury bond exchange traded fund (ETF) on Tuesday, it was moving.
Check out the ETF Dashboard mid-day:
Leading the charge, of course, is the PIMCO 25+ Year Zero Coupon U.S. Treasury (NYSEArca: ZROZ), which was up 5% about 30 minutes before the market closed.
Behind the move are a host of developments that turned traders skittish about the economy:
- Interest rate decreases in China have led to anxiety about what this means for China’s demand of commodities and raw materials. China appetite has been a major driver of copper, steel, coal, cotton and a host of other commodities. A drop-off would be keenly felt.
- Homebuilders are still down in the dumps, though sentiment is improving. While the index moved up for a second straight month, to 17, any number above 50 signals optimism.
- Ireland’s economy remains cause for concern. European officials are weighing a multi-billion dollar rescue, but will it be enough? Some aren’t so sure.
Despite today’s pop in Treasury prices, the long-term outlook is still on the bearish side. Traders are already cautioning that Treasuries could face more selling pressure, says Min Zeng for The Wall Street Journal. One analyst says that the Treasury space has become crowded and that a big sell-off is a risk.
If you’re in Treasuries, take a look at the trend lines. You’ll see that many of them are just around the 200-day moving average, while some have dipped below. If you’re looking to be in this space for safety, consider the current climate and the risks outlined above.
For more stories about Treasury bonds, visit our category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.