The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) opened up on a gap down today, trading with a $115 handle once again, and the prevailing theme in options markets has been bearish sentiment being conveyed in terms of bond prices.
TLT puts continue to be accumulated in the marketplace and TBT (ProShares UltraShort 20+ Year Treasury) calls were purchased yesterday by institutional participants adding to existing positions.
TLT has not traded lower than $115.51 (intraday low nine trading sessions ago) since early last spring, so at current levels ($1115.82) and given the eagerness of shorts to enter the picture here and create even more static, the longer term Treasury bond market via TLT is one of the first things on our immediate radar right now. [Tresury ETFs Weak as 10-Year Yield Above 2% Before Auction]
Interestingly, neither fund has seen considerable real flows in either direction in the past week or so.
We have covered the degradation of longer term U.S. Treasury bond prices and related ETF/options flows that have appeared in the marketplace over the past few months as TLT — expense ratio 0.15% — has stalled from its November of 2012 high down to current levels ($115.82), inside of three months, a nearly 9% fall.
On Jan. 2 we pointed out the increased appetite for short exposure to longer dated U.S. Treasuries in this piece, and given the continued weakness in Treasury prices (and rise in yields) we have an opportunity to play contrarian today.
Having already highlighted ETPs including TBT (ProShares UltraShort 20+ Year Treasury, Expense Ratio, 0.95%), TMV (Direxion Daily 20 Year Plus Treasury Bear 3X, Expense Ratio 0.95%), and SBND (PowerShares DB 3X Short 25+ Year Treasury Bond ETN, Expense Ratio 0.95%) recently, we have to think there are at least a “small camp” of institutional investors that may see appeal at current levels in U.S. Treasuries and may attempt to play a potential “dead cat bounce” if there is one.
TLT remains the largest player in the “long” space here, with more than $3 billion in current assets under management, while other alternatives in the ETP landscape that offer exposure to longer dated U.S. Treasury bonds include VGLT (Vanguard Long Term Government Bond, Expense Ratio 0.14%), and TLO (SPDR Barclays Long Term Treasury, Expense Ratio 0.13%) for instance.