After a brief respite, selling has resumed in longer dated U.S. Treasury bonds in recent sessions and it has affected a number of ETFs that are in this category.
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) plunged 1.73% yesterday and closed below its 200 day moving average for the second time in the past two weeks on very heavy trading volume.
Eleven trading sessions ago, after a precipitous fall TLT found support on its 200 day moving average and gradually climbed back to some degree, before being drubbed last Friday and again yesterday amid heavy selling pressure. [Options Traders Bet on Higher Bond Yields with Short ETFs]
We have pointed out the presence of bearish speculators in longer dated treasuries dating back to 2010, but this activity has significantly accelerated in recent weeks as treasury bonds have fallen rapidly in price (and yields have risen).
In fact, TLT put volume was literally off the chart yesterday, with more than 100,000 contracts trading, and ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT) call buyers surfaced again in notable size.
Since TBT is a daily leveraged inverse product, these call buyers will profit as treasury bond prices fall. Activity in related ETFs, Direxion Daily 20+ Year Treasury Bear 3X (NYSEArca: TMV) and ProShares Short 20+ Year Treasury (NYSEArca: TBF), have also surged recently, as it seems that options players continue to add to positions that would turn a profit as treasury bond prices fall (and yields rise).
In recent sessions, about $200 million has flowed out of TLT as well in redemption activity. Selling pressure has not been relegated to longer duration U.S. Treasury ETFs, as intermediate term products such as iShares Barclays 7-10 Year Treasury Bond (NYSEArca: IEF) and iShares Barclays 3-7 Year Treasury Bond (NYSEArca: IEI) have also sold off sharply lately as it seems apparent that portfolio managers in search of higher yields are starting to dump treasuries in a wholesale manner, and are perhaps reallocating to higher yielding corporate bonds or even equities.
We do note that this morning with equity futures off significantly in the early-going, Treasury bonds seemed to have caught a bid as TLT is up about 1% and back above its 200 day moving average at least for the moment.
iShares Barclays 20+ Year Treasury Bond
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