U.S. Treasury exchange traded funds posted big gains Wednesday as yields declined and investors looking for safety moved into the bond ETFs despite the recent Standard & Poor’s downgrade of U.S. debt.
Treasuries also got a boost after an auction of 10-year notes saw strong demand, according to reports. Ten-year note yields have fallen sharply this week and are hovering just above 2%, levels they haven’t seen since the depths of the 2008 credit meltdown. Bond yields and prices move in opposite directions.
The iShares Barclays 20 Year Treasury Bond Fund (NYSEArca: TLT) rallied 3% on Wednesday, while in stocks the Dow Jones Industrial Average shed 530 points. The ETF was up 15.4% year to date as of Aug. 9, according to Morningstar.
The benchmark 10-year note touched upon a full-point gain during trading, reports Emily Flitter for Reuters.
“I think there’s concern about just how much Greek debt French banks really do hold and how much the European Central Bank is willing to backstop all this,” commneted Bret Barker, portfolio manager at TCW.
Treasury yields pulled back sharply Tuesday after the Federal Open Market Committee announced it will keep rates low until mid=2013. Additionally, lingering concern over the Eurozone and slower growth in China has helped prop up Treasuries.
“While the Fed action will benefit the stock market, we still have continuing issues in Europe and slower growth in China — as you look around the world globally there’s still plenty to be concerned about,” remarked Scott Graham, head of government bond trading at BMO Capital Markets.
iShares Barclays 7-10 Year Treasury Bond Fund (NYSEArca: IEF)
For more information on Treasuries, visit our U.S. Treasury category.
Max Chen contributed to this article.
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