Exchange traded funds that invest in U.S. Treasury bonds pulled back this week as stocks and commodities benefited from investors regaining some of their appetite for riskier assets.
Yields on the 10-year note climbed back above 2% on Friday and Treasury ETFs were in the red. Bond prices and yields move in opposite directions.
The desire for safety amid the recent stock correction has pushed investors into U.S. Treasury bonds despite extremely low yields. The move suggests investors are worried about deflation and the Eurozone debt crisis.
This week’s slide in Treasury ETFs brought out the usual predictions that the multidecade rally in government debt is finally over. After all, how much lower can yields go from this level?
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) pared its loss Friday after trading as low as $116.85 a share. The bond ETF spiked to a 52-week high of $125.03 a share earlier in the week.
The fund has risen above the high it reached in early 2009 during the financial crisis.
The bounce in Treasury yields this week has been profitable for ETFs that bet against bonds. These inverse ETFs include:
- ProShares Short 20+ Year Treasury (NYSEArca: TBF)
- ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT)
- Direxion Daily 30 Year Treasury Bear 3X (NYSEArca: TMV)
- Direxion Daily 10 Year Treasury Bear 3X (NYSEArca: TYO)
- PowerShares DB 3X Short 25+ Year Treasury (NYSEArca: SBND)
iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT)
The opinions and forecasts expressed herein are solely those of John Spence, 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.