European Debt Woes Create ETF Winners and Losers | ETF Trends

This week, Spain decided to bail out a small savings bank called CajaSur for around $750 million. The head of the European Commission knocked Germany’s proposals for the debt crisis as naive. There have been winning and losing exchange traded funds (ETFs) as a result.

First off, the European debt problem is making banks jittery, and as a result, banks are charging each other more to borrow, which is hurting businesses who borrow from the banks, reports Alisa Roth for Marketplace. Senior Economist at Standard & Poor’s Beth Ann Bovino believes that this will hinder business expansions and dampen employment prospects. [Spain ETF Gets Hit After Bank Failure.]

  • iShares MSCI EMU Index (NYSEArca: EZU)
  • Vanguard European ETF (NYSEArca: VGK)
  • iShares MSCI Spain (NYSEArca: EWP)
  • iShares MSCI Germany Index (NYSEArca: EWG)

On the “winning” side of things are Treasury bonds. Investors are looking for quality and safety right now, and it can be found in U.S. debt. Treasury bond ETFs are among the easiest ways to get exposure to this area. [Europe Crisis Makes Treasury Bond ETFs Winners.]

  • Vanguard Extended Duration ETF (NYSEArca: EDV)
  • iShares Barclays 20-Year Treasury Bond Fund (NYSEArca: TLT)
  • PowerShares 1-30 Laddered Treasuries Portfolio (NYSEArca: PLW)

Cheaper Treasuries is keeping mortgage rates low, which is helping the housing sector further stabilize, adds Bovino. Tom Higgins, chief economist at Payton and Rygel, opines that mortgage rates will remain low for the foreseeable future. [Homebuilder ETFs: Light at the End of the Tunnel?]

  • iShares Dow Jones U.S. Home Construction (NYSEArca: ITB)
  • SPDR S&P Homebuilders (NYSEArca: XHB)

However, Bovino cautions that the bad news could still worsen and the sovereign debt crisis in Europe could potentially harm the U.S. economy.

Fore more information on Europe, visit our Europe category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.