Rising U.S. Treasury yields have pushed government bond exchange traded funds lower so far in February on hopes Greek will seal a second financial bailout and ease tensions over the Eurozone debt crisis.

A spike in yields would punish nervous investors who have piled into the perceived safety of Treasury ETFs, since yields and bond prices move in opposite directions. It could also unleash a tidal wave of cash into stocks as risk-averse investors finally get off the sidelines.

The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) is down about 3% over the past week on signs Greek leaders will reach a deal on austerity measures, which would clear the way for more financial aid from the so-called troika – the European Union, European Central Bank and International Monetary Fund.

Yields on the 30-year Treasury bond have moved up from a low of about 2.8% in December to roughly 3.2%, while stocks have rallied on improved risk appetite and hopes a Greek default won’t blow up the EU.

Treasury ETFs rallied sharply over the summer on the risk-off trade but have bounced in a range in recent months with investors looking for some kind of resolution to the European debt logjam. The long-term Treasury ETF gained 34% last year but has dropped below its 50-day exponential moving average. The 200-day average is significantly lower than current levels.

Of course, investors trying to time a top in Treasury ETFs have been burned in recent years. [Treasury ETFs on the Precipice]

Still, income-oriented investors shell-shocked by the subprime meltdown and Europe’s debt crisis have been forced to accept the rock-bottom yields that Treasury ETFs are offering. Aside from the risk of a jump in Treasury yields, they could also be hit by rising inflation, which hurts bonds.

“We are literally running out of superlatives to describe how much we hate bonds,” money manager GMO says in its latest quarterly update released Thursday, CBS MoneyWatch reports. “Yields are pitiful, dangers of even a slight recovery that could wreak havoc for long-duration portfolios loom, and monetary policies globally certainly have added to the specter of rising yields.”

iShares Barclays 20+ Year Treasury Bond

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