They say the bond market is smarter than the stock market. The powerful rally in safe-haven Treasury bond ETFs recently was indeed a warning that perhaps all was not well in the economy.
The iShares Barclays 20+ Year Treasury Bond Fund (NYSEArca: TLT) jumped nearly 2% in Friday’s premarket trading following a miserable nonfarm payrolls report for March. The U.S. economy created 88,000 jobs last month, far less than the gain of 190,000 economists had predicted.
Yields on the 10-year Treasury note plunged below 1.7% to their lowest levels since December. Bond prices and yields move in opposite directions.
“Hiring is still weak overall,” Scott Anderson, chief economist at Bank of the West, said in a Bloomberg report. “We could see some improvement in the economy in the second half but not enough to move the needle on payroll growth. The Fed will remain fully accommodative through the end of the year.”
Recent strength in Treasury ETFs has perplexed investors as the S&P 500 sets new all-time highs. Treasuries tend to rise when investors are positioning for deflation and economic weakness. [Stubborn Bid in Treasury ETFs]
TLT, the Treasury ETF, was set to open above its 200-day simple moving average for the first time this year.
Stocks were poised to open sharply lower Friday as Dow futures shed more than 100 points. SPDR Dow Jones Industrial Average (NYSEArca: DIA) was down over 1% before the bell.
iShares Barclays 20+ Year Treasury Bond Fund
Full disclosure: Tom Lydon’s clients own TLT.