Treasury ETF
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) is up 5% year to date and is lagging the S&P 500. The Treasury ETF is flat the past three months.
Chris Kimble at Kimble Charting Solutions says investors are trying to figure out whether the Fed’s QE3 will lead to increased inflation or deflation.
“Government bond yields increased and prices fell, going into the QE3 announcement and the opposite has happened since. Did this price action fool a few investors?” Kimble writes at his blog.
From a technical perspective, yields are on a rising support line while bond prices find themselves at falling resistance. The bond market is seen as “smarter” than the stock market so the next move in yields could be telling, he said.
Kimble also points out a bearish “head and shoulders” pattern playing out in TLT, the Treasury ETF. The fund is testing its 50-day simple moving average after finding support at the 200-day average earlier this month.
PIMCO’s Gross recently urged investors to get out of index-based total-market bond ETFs that have high allocations to Treasuries, and into PIMCO Total Return ETF, which he actively manages.
“Their universe is basically a 40% Treasuries universe yielding 90 basis points. You can’t produce a return out of that type of yield. I say, ‘Are these people crazy?’” Gross said at an IndexUniverse conference. [Gross Touts PIMCO ETF’s Active Appraoch]
iShares Barclays 20+ Year Treasury Bond
Full disclosure: Tom Lydon’s clients own TLT.