Stock exchange traded funds are on a roll this week as the SPDR S&P 500 ETF (NYSEArca: SPY) tacked on another 1% in Thursday’s rally.

Conversely, Treasury ETFs have fallen sharply as traders position for the end of so-called QE2, the second round of the Federal Reserve’s quantitative easing program. The Fed’s spree of buying Treasury bonds ends on Thursday, along with the second quarter.

Pimco’s Bill Gross has been calling June 30 a “D-Day” for markets and wondering aloud recently who will step up and buy Treasuries as the Fed program is phased out. Investors nervous about U.S. spending and gridlock in Washington may demand higher yields, which would send bond prices lower.

“Because QE has affected not only interest rates but stock prices and all risk spreads, the withdrawal of nearly $1.5 trillion in annualized check writing may have dramatic consequences in the reverse direction,” Gross wrote in a March investment outlook.

“If on June 30, 2011 … the private sector cannot stand on its own two legs – issuing debt at low yields and narrow credit spreads, creating the jobs necessary to reduce unemployment and instilling global confidence in the sanctity and stability of the U.S. dollar – then the QEs will have been a colossal flop,” Gross added.

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