Treasury bond ETFs rallied in Monday’s risk-off market as yields on the 10-year note dropped below 1.9%.
The iShares Barclays 20+ Year Treasury Bond Fund (NYSEArca: TLT) jumped 1.3% at last check on above-average volume. Bond prices and yields move in opposite directions.
Monday’s rally was TLT’s largest gain of 2013 by far, and the bond ETF is testing its 50-day simple moving average. It hasn’t traded above this technical indicator since December.
Investors were unnerved by the looming sequester deadline in the U.S., and also a parliamentary election in Italy. [Italy ETF Swings Lower on Berlusconi, Election]
Treasury bonds rose and 10-year yields fell to month-long lows “as mounting uncertainty about the outcome of Italy’s election prompted investors to seek safe-haven assets,” MarketWatch reported.
“We’re starting to see short covering in Treasurys. Investors are trying to seek a safe haven because all of a sudden you’re starting to see a reversal in the peripheral debt markets,” said Tom di Galoma, managing director at Navigate Advisors, referring to the Italian and Spanish bond markets.
Treasury ETFs have been trending lower in recent months on talk of a “great rotation” from bonds to stocks. Inflation and an improving economy are among the largest perceived risks to Treasury bonds.
TLT is down about 4% the past three months, including Monday’s rally.
iShares Barclays 20+ Year Treasury Bond Fund
Full disclosure: Tom Lydon’s clients own TLT.