Last week amid a steep and sudden reversal in equities mid week and a very weak finish on Friday, we observed notable inflows in several fixed income based ETFs.
Specifically shorter and medium term duration bond ETFs caught a bid, and today we focus on two products that focus on medium term duration bonds of maturities between 7 and 10 years.
The iShares Barclays 7-10 Year Treasury Bond (NYSEArca: IEF) rallied last week and closed at a multi-year high on above average volume throughout the week. The fund also reeled in approximately $200 million in new assets via creations.
It was only about a month and a half ago in mid to late March when U.S. Treasuries literally fell off a cliff before finding technical support at their 200 day moving averages, and since then Treasuries have steadily been bid up to current levels.
From recent trough to peak from late March of this year, IEF has rallied an impressive 4.5%.
We find the recent price action especially notable since short interest had been building, especially in longer duration U.S. Treasury bonds such as iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) and via leveraged inverse products such as ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT) and Direxion Daily 20 Year Plus Treasury Bear 3X (NYSEArca: TMV), to multi-year heights, only to see the bond bears disappointed by the quick reversal in treasury prices with most trading at new recent highs late last week.