Investors often watch exchange traded funds following the U.S. dollar and CBOE Volatility Index futures to get a sense for whether markets are in a risk-on or risk-off mood.
U.S. Treasury bond ETFs can also provide clues on the market’s level of risk aversion and Europe-related fear.
Treasury prices tend to have an inverse relationship with stocks as investors tend to move into U.S. government bonds during financial market shocks.
With 10-year Treasury note yields hammered below 2% this fall, deflation fears still stalk the market. Bond prices and yields move in opposite directions.
Of course, the question is how much lower can yields go from here?
Some institutional investors are making large bets that yields will rise by purchasing inverse Treasury ETFs. [ETF Chart of the Day: Shorting Treasuries]