Treasury Bond ETFs Not Confirming Stock Weakness
October 24th 2012 at 2:35pm by John Spence
SPDR S&P 500 (NYSEArca: SPY) and iShares Barclays 20+ Year Treasury (NYSEArca: TLT) are both lower for the month of October.
Stocks have been weak recently, so you would think the long-term Treasury ETF would be higher as investors move into safe havens. But that hasn’t been the case.
U.S. equities and Treasuries tend to move in opposite directions, but their correlation has been rising the past month. [Who’s Lying: Treasury or Stock ETFs?]
For example, yields on the 10-year Treasury note haven’t budged much following their August bounce. Yields are hovering around 1.8% after touching 1.4% in July. Bond yields and prices move in opposite directions.
“I am surprised that yields haven’t fallen more of late, along with the stock market,” says Chris Kimble at Kimble Charting Solutions.
He also points out a bearish “head and shoulders” pattern playing out in TLT, the Treasury ETF. [Treasury ETFs Look Vulnerable as PIMCO’s Gross Cuts Holdings]
Rising Treasury yields could mean investors are moving toward a risk-on attitude as the economy improves or they see inflation picking up. Or maybe they’re just not excited about bonds that are yielding less than 2%.
iShares Barclays 20+ Year Treasury
Full disclosure: Tom Lydon’s clients own SPY and TLT.
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.
