Exchange traded funds (ETFs) following Treasury bonds bear watching Thursday after PIMCO’s Bill Gross said Treasuries have “little value” due to the growing U.S. debt load.
More high-profile investors are voicing bearish concerns about Treasuries and some are saying the multi-decade bull market in U.S. government bonds is ending.
Yields on the 10-year note rose to 3.5% earlier this week. After climbing above 3% in late 2010 as Treasury prices fell, 10-year yields have essentially traded in a range so far this year, searching for direction.
A big question for investors is whether the Federal Reserve will extend its so-called quantitative-easing program. The Fed has been providing support to the Treasury market in its efforts to keep rates low and stimulate the economy. It also bought mortgage-backed securities in the credit crunch to stabilize the housing market.
10-year note yields rising above 4% would only embolden the bond bears.
Gross, who runs the world’s largest bond fund at PIMCO, wrote in his popular monthly outlook that Treasuries “have little value within the context of a $75 trillion total debt burden.” [PIMCOs Gross Exits Treasuries – What About ETFs?]
Some traders watch the roughly $3 billion iShares Barclays 20+ Year Treasury Bond Fund (NYSEArca: TLT) as an indicator for the long end of the Treasury curve. The bond ETF has pulled back somewhat after spiking earlier in March. The fund was down 1.2% year to date through Wednesday’s close, according to Morningstar.
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