The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was up 1.3% on Monday after the Federal Reserve bought Treasuries and on lingering worries surrounding Eurozone debt.
Treasury 30-year bonds rose for the first time in three days after the Fed purchased about $2.54 billion of Treasuries as part of “Operation Twist,” Bloomberg reported Monday. The central bank has been buying long-term bonds in a bid to lower borrowing costs. Bond prices and yields move in opposite directions.
“Markets are very nervous even with the news out of Europe,” said Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia, in the article. “There are still questions on where this is taking us and a lot of people are afraid.”
Stock exchange traded funds were lower Monday as the long-term Treasury ETF gained ground.
While the market’s attention has been solely fixed on Europe, back in the U.S., a “supercommittee” will begin crafting an agreement on lessening the country’s debt. [Stock ETFs Eye Supercommittee]
The group of 12 U.S. lawmakers will need to carve out $1.2 trillion in deficit reductions by the Nov. 23 deadline. If the group fails to reach an agreement, the deadline will trigger cuts across the board, writes Cynthia Lin for WSJ.com.
Ahead of the new debt plan, 10-year Treasury yields have already dropped down 24 basis points over the last two weeks as prices rose.
During the summer, money managers were selling August T-bills that were at risk of defaulting, sending Treasury bonds reeling, as Congress dragged its feet until the last minute in deciding to lift the debt ceiling. If the supercommittee comes to an uninspiring agreement, U.S. Treasuries may begin to lose its appeal as a safe source of debt.