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
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