About a month ago we noted significant asset inflows in leveraged inverse Treasury-based exchange traded funds, notably Direxion Daily 20 Year Plus Treasury Bear 3X (NYSEArca: TMV) and ProShares UltraShort Barclays 20+ Year Treasury (NYSEArca: TBT). [ETF Chart of the Day]
These ETFs are leveraged bets against U.S. long-term Treasury bonds. They rise when bond prices decline.
These inflows preceded a notable sell-off in U.S. Treasuries (yields rose) as investors seemed to regain their appetite for risk and snapped up equities throughout early and mid October until the end of the month.
Then, November rolled around, and the run up in equities paused due to global unrest, causing institutional momentum and assets to flow back from equities and into Treasuries once more.
Yesterday, we noted huge trading volume and resulting inflows in TMV, with over 3 million shares trading in the ETF versus average daily volume of (split adjusted), less than 500,000 shares.
Furthermore, we are seeing outflows via redemptions in iShares Barclays 20+ Year Treasury (NYSEArca: TLT) this week, with over $300 million flowing out of the fund, which is not an insignificant amount of the overall assets in the ETF (approximately 10% of its assets under management).
TLT actually touched its 50 day moving average briefly yesterday before rallying slightly, and thus far it has successfully remained above this level for the past 9 trading sessions.
Based on recent activity, it seems clear to us that investors are rotating back out of Treasuries, and perhaps redeploying the proceeds elsewhere (equities, or cash potentially), and furthermore, one large institution or institutions are making an aggressive short bet against long-term Treasuries via TMV.
The bond market is closed Friday for Veterans Day, although the ETFs will trade as the stock market is open.
Direxion Daily 20 Year Plus Treasury Bear 3X
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