Long-Term Treasury ETFs Jump On Fed’s $400 Billion Move
September 21st 2011 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.
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