Recent strength in exchange traded funds that invest in U.S. Treasuries doesn’t bode well for stocks and shows investors worried about deflation are moving into safe havens.
The U.S. government sold debt at a record-low yield last week, as buyers accepted a negative payment for the third time in history on 10-year notes.
“The U.S. is the favorite safe haven,” Hiromasa Nakamura, investor for Mizuho Asset Management Co., a unit of Japan’s largest publicly traded bank, said in a report. “There’s a flight to quality. The world economy is declining. Recently the rally has gained strength.” [Treasury ETFs: TLT Nears All-Time High as Yields Plunge]
The rally in Treasury ETFs reflects concerns that Greece will leave the euro, and also suggests investors are worried about deflation. Investors are reacting to fear as they look for safe havens to park their cash, due to the intensifying Eurozone crisis. Yields have been driven to all-time lows as investors are filing out of stocks and into U.S. government bonds. [Treasury ETFs Rally as 10-Year Yield Dips Below 1.8%]