One of the more interesting charts over the past week is that of iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT), as investors will note the product running to a new all-time high just eight trading sessions ago, only to reverse almost 4.5% to current levels.
Trading volume has been phenomenally high in the ETF as well as related ETFs in the Treasury Fixed Income space for the past several weeks, as there feels to be a true “push and pull” in store between institutional managers that are making allocation decisions between “equity” and “government bonds.”
TLT remains handily above both its 50 and 200 day moving averages, and near term price action seems very important in the product (which is tied to the performance of the Barclays Capital 20+ Year Treasury Bond Index) around the $124-$125 level as this is where a technical “break out” gap up occurred at the end of May before TLT surged to new highs.
Additionally, we have noted very high short interest that exists in the longer term Treasury Bond market via bearish positions in the futures, options, and other instruments tied to the Bonds, and that said, there may very well be some short covering that provides support and some bids at these levels.
We note that the choppy price moves in the Treasury Bond market as of late are not random, but are rather tied to the daily gyrations of world equity and fixed income markets, and the fickleness of the market in general in finding a near term direction, and establishing if we are in a “risk on” or “risk off” environment heading into the summer.
We have mentioned repeatedly, the “come and go” presence of bearish speculators in the Long Term U.S. Treasury ETF space, for the greater part of about two years, where institutional options players will purchase calls in TBT (ProShares UltraShort 20+ Year Treasury Bond) and/or puts in TLT.
Other, similar strategies that have been utilized on the “short” side of Treasury Bond prices by asset managers that we have noted have included TMV (Direxion Daily 20 Year Plus Treasury Bear 3X) and SBND (PowerShares DB 3X Short 25+ Year Treasury Bond), which features a monthly re-balancing methodology, whereas TBT and TMV are daily leveraged products.
It is important to note that the “inverse” funds mentioned all incorporate leverage and are not meant for longer term, “buy and hold” positions due to reset of the leverage and the damage that can occur in choppy markets. That said, technical managers that want to swiftly embrace uni-directional trending markets, can likely use funds like these to capitalize on a continued Treasury sell-off (and environment of rising yields).
iShares Barclays 20+ Year Treasury Bond
For more information on Street One ETF research and ETF trade execution/liquidity services, contact pweisbruch@streetonefinancial.com.
