Treasury, Gold ETFs Tank After Jobs Report as Dollar Spikes

July 5th at 9:02am by John Spence

Yields on the 10-year Treasury note jumped to 2.7% on Friday morning after the stronger-than-expected jobs report, pulling down ETFs that invest in U.S. government bonds.

The immediate reaction to the June nonfarm payrolls report in ETFs tracking U.S. Treasuries, the dollar and gold suggests investors were positioning for the Federal Reserve to soon taper its bond purchases.

The iShares 20+ Year Treasury Bond (NYSEArca: TLT) was down about 2% in premarket action. Treasury yields and prices move in opposite directions. Yields on the 10-year note haven’t been at 2.7% since August 2011.

Meanwhile, PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) rose 1.5% and SPDR Gold Shares (NYSEArca: GLD) fell 2% before the bell.

The U.S. economy created 195,000 new jobs last month, more than economists had expected. Also, the Labor Department revised the April and May data higher.

In U.S. stocks, SPDR S&P 500 (NYSEArca: SPY) rose about 1% in premarket trading.

“What’s still unclear is whether the level of job creation in the second quarter will sway the Federal Reserve on when to end a massive bond-purchasing program designed to keep U.S. interest rates low,” reports Jeffry Bartash for MarketWatch.

“The central bank has said it would begin to back away from its low-interest rate strategy once it became clear the economy was on an upswing,” he added. “Yet job growth needs to remain at current levels or accelerate and the unemployment rate would have to fall toward 7% to hasten the Fed’s withdrawal, analysts say.”

iShares 20+ Year Treasury Bond

Full disclosure: Tom Lydon’s clients own SPY, TLT and GLD.

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.

Tickers