Treasury and High-Yield Bond ETFs

Aren’t Treasury bonds supposed to be “safer” than high-yield corporate bonds?

That hasn’t been the case recently. Treasury ETFs were among the sharpest decliners this week while high-yield bond ETFs are hanging in there and trying to break out to new multi-year highs.

The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was on track for a loss of more than 3% for the week in afternoon trading Friday. The Treasury fund was in the red after the February jobs report came in stronger than expected. TLT traded lower every day this week.

Yields on the 10-year Treasury note jumped as high as 2.09% on Friday to the highest level since April 2012.

The employment report “added to bond bears’ arguments that as the economy continues to improve, the Federal Reserve may need to cut back or even stop buying Treasury bonds before the end of this year,” Dow Jones Newswires reported. “Yet bond bulls are not convinced the Fed will change its stance on bond buying on this report … Some traders believe that yields at multi-month highs may lure bargain hunting investors and boost demand for the auctions [next week].”

Noted bond fund manager Jeffrey Gundlach made waves with recent reports that he reversed his once-bearish stance on Treasury bonds. “I bought more long-term Treasuries in the last month than I’ve bought in four years,” Gundlach said in a Reuters report.

Elsewhere in fixed-income ETFs, high-yield corporate bond funds such as iShares iBoxx High Yield Corporate Bond Fund (NYSEArca: HYG) and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) were poised for slight gains this week. [Comparing the Two Largest High-Yield Bond ETFs]

In the major U.S. stock indices, the S&P 500 was set for a weekly advance of 2%, the Dow also rose 2% after setting a new all-time high, and the Nasdaq Composite added 2.2%. [Stock Index ETFs: Dow Jones Industrial Average vs. S&P 500]