Recently in the options markets, we have seen renewed interest in call buying in ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT), which is essentially a bearish bet against prices of longer dated Treasury bonds (and simultaneously a play on rising yields).
Similarly, assets have flowed out of iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) via redemption activity, with several hundred million dollars leaving the ETF just last week alone. Additionally, we note a spike in short interest in TLT during the month of January, rising by more than 30% over the previous month. [What Rising Treasury Yields Mean for Bond Investors]
In fact, current short interest in the fund equals approximately half of all shares outstanding in TLT.
Put buying has picked up in TLT in recent weeks as well, as has activity in another leveraged/inverse fund that is similar to TBT, Direxion Daily 20 Year Plus Treasury Bear 3X (NYSEArca: TMV), seeing relatively strong inflows. [Stock, Treasury ETFs Send Mixed Messages]
So, in the face of the recent equity market rally in the early going in 2012, the “Bond Bears” whom were so prevalent in 2011 (not to mention consistently incorrect) are resurfacing once more and enacting trading strategies via the ETFs mentioned above.
We point out that TLT has traded below its 50 day moving average for the past seven sessions, but if one looks back at a historical price chart in the fund, over the past year, any weakness in bond prices has been simply temporary, and just a part of an overall bullish trend and gradual surge upward. [Treasury ETFs on the Precipice]
However, with institutional assets flowing unabated into equities and out of Treasury related products in 2012, it appears that U.S. Treasury shorts are showing their hands again, and perhaps this may signal more than just a temporary reversal.
Direxion Daily 20 Year Plus Treasury Bear 3X
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