“A heavy Treasury auction schedule with a big settlement on Thursday was enough to contribute to keeping stock prices in check last week, but not enough to knock down Treasuries,” writes Lee Adler at Minyanville. “Demand for U.S. government paper is so great it simply engulfs even heavier-than-expected levels of new supply. The massive capital flight out of Europe is now confined to the only game in town, the U.S. Treasury market.”
The dollar and Treasury bonds have rallied despite Standard & Poor’s stripping the U.S. of its triple-A credit rating, Bloomberg reported Monday. Four months after the move, government bonds have returned 4.4% and the dollar has gained 8.6% relative to a basket of currencies, according to the report.
Two ETFs tracking “STRIPS,” zero coupon bonds issued by the U.S. Treasury, were the top performers last week among unleveraged funds, rallying more than 7% — PIMCO 25+ Year Zero Coupon U.S. Treasury (NYSEArca: ZROZ) and Vanguard Extended Duration Treasury (NYSEArca: EDV). [ETF Chart of the Day: Treasury ‘STRIPS’]
