Long-Term Treasury ETFs Jump On Fed’s $400 Billion Move

September 21st at 3:54pm by Tom Lydon

Long-term U.S. Treasury exchange traded funds (ETFs) vaulted higher, following the Federal Reserves’ decision to focus on Treasuries with longer-dated maturities.

iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was up 3.26% in afternoon trading. The fund has a 12-month yield of 3.81%.

Yields on 30-year U.S. Treasury bonds fell to their lowest level since January 2009, following the Federal Reserve’s decision to shift holdings on short-term securities to long-term debt, report Cordell Eddings and Susanne Walker for BusinessWeek. The spread between 30-year notes and 2-year notes dropped to the lowest level since April 2009.

Yields on 30-year bonds dropped to a 3.03% low after the announcement that the central bank will swap $400 billion worth of short-term debt for maturities of six to 30 years.

“This is a stronger policy action than the market was expecting, given their aggressiveness further out the yield curve, and so you are seeing Treasuries rally as a result,” Gary Pollack, head of fixed-income trading at Deutsche Bank AG’s private wealth management unit in New York, commented.

The action is intended to “put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the Federal Open Market Committee stated.

Yields on 10-year Treasury notes, on the other hand, slid to a record low of 1.8765% in earlier trading ahead of the Fed’s announcement, according to another BusinessWeek report. [ETFs Primed for Big Moves as Fed Meets]

iShares Barclays 7-10 Year Treasury Bond Fund (NYSEArca: IEF) was slightly up 0.40% at last check. The fund has a 12-month yield of 2.77%.

iShares Barclays 20+ Year Treasury Bond

For more information on U.S. Treasuries, visit our Treasury bonds category.

Max Chen contributed to this article.

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.

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