Exchange traded funds tracking long-term U.S. Treasury bonds are down more than 3% so far this week amid a short-term spike in yields.
Yields on the 30-year bond are shooting higher in the wake of the Federal Reserve statement Tuesday.
Analysts have blamed the move on rising inflation expectations and technical selling as Treasury bond ETFs surrender key support levels.
The market may also be selling off “because people seem slightly less sure that the Fed will be ready to buy a lot of long-term Treasurys to support the economy,” according to WSJ.com’s MarketBeat blog. “That’s because the economic data has been pretty decent, which the Fed acknowledged in the opening paragraph of its statement, including saying that the unemployment rate had ‘declined notably.’”
Some institutional investors are using inverse Treasury ETFs to hedge against a rise in rates. The bearish ETFs climb when bond prices fall. [Shorting Treasury Bonds with ETFs]
These funds include ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT), ProShares UltraShort 7-10 Year Treasury (NYSEArca: PST), ProShares Short 20+ Year Treasury (NYSEArca: TBF) and Direxion Daily 30-Year Treasury Bear 3X (TMV).
The iShares Barclays 20+ Year Treasury (NYSEArca: TLT) is off 3.3% so far this week. Yields on the 30-year bond have jumped from under 3.2% to nearly 3.4%.
iShares Barclays 20+ Year Treasury
