Benchmark Treasury bond yields recently touched a 6-month high. However, investors who believe the sell-off may be overdone could take a look at long-term and leveraged Treasuries-related exchange traded funds to capture a rebound.
Yields on 10-year Treasury notes hit an intra-day high of 2.366% but dipped to 2.249% Tuesday.
In afternoon trading Tuesday, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) was back up 0.3%, PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ) was 1.4% higher and Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) gained 0.6%. The long-term Treasury bond ETFs are seeing a small bounce after a month of selling, which sent the ETFs below their long-term trend lines.
More aggressive traders can consider leveraged options to play a bounce in Treasuries, such as the ProShares Ultra 20+ Year Treasury (NYSEArca: UBT) and Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (NYSEArca: TMF). On Tuesday, UBT increased 1.3% and TMF rose 1.0%. However, potential investors should be aware that these types of leveraged investments come with greater risks and should be closely monitored.
U.S. Treasuries pared the earlier selling Tuesday as traders tiptoed back into after yields on the benchmark 10-year Treasuries traded at around a 6-month high, reports Min Zeng for the Wall Street Journal.
Market observers pointed to buying demand from hedge funds, asset money managers and even foreign investors, with many believing that the risk of bond yields spiking remains significantly low since the Federal Reserve has stated that monetary tightening will be gradual and slow.
“The selloff has been driven by technical factors,” James Camp, head of fixed income at Eagle Asset Management, said in the article. “It is overdone.”