Treasury ETFs Suffer Worst Loss Since 2010
April 3rd 2012 at 9:34am by John Spence
Treasury ETFs during the first three months of the year absorbed their biggest loss since the fourth quarter of 2010, but most traders are predicting a rebound for the rest of 2012.
“After rising to as high as 2.4% last month from 1.88%at the end of 2011, the yield on the benchmark 10-year note will finish 2012 at 2.49%, according to the average estimate in a Bloomberg News survey of the 21 primary dealers that trade with the Federal Reserve,” Bloomberg reported Tuesday. “That’s the same as a January poll, suggesting the market isn’t ready to declare a bear market in bonds after a 30-year bull run.”
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) fell 7% in the first quarter. [Special Report: Navigating Higher Rates with Bond ETFs]
Some large traders have been positioning for higher yields, and lower bond prices, with inverse Treasury ETFs. [ProShares Adds Leveraged ETF That Shorts Treasuries]
“Signs of strength in the economy, which caused a 5.56% loss in bonds maturing in 10 years or more last quarter, may fade in the second half of 2012, the dealers say. Tax cuts are expiring, $1 trillion of mandatory federal budget cuts are due to kick in and $100-a-barrel oil is eating into consumer spending,” Bloomberg reported.
Yields on the 10-year note were trading around 2.2% on Tuesday morning.
“The back-up that we’ve seen over the past three or four weeks was not fully justified by what we’re seeing in the data,” said Aneta Markowska, a senior U.S. economist at primary dealer Societe Generale, in the article.
iShares Barclays 20+ Year Treasury Bond
The opinions and forecasts expressed herein are solely those of John Spence, 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.
