Inverse Treasury ETFs have seen volume pick up this week as traders look for vehicles to hedge rising interest rates or simply speculate on lower bond prices.
The iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) lost 2.5% on Tuesday to close below $114 a share for the first time since the spring of 2012, said Paul Weisbruch at Street One Financial.
“Volumes were heavy throughout the fixed-income space,” he said in a note Wednesday. [Treasury Bond ETFs Fall]
Junk debt ETFs such as iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK) also saw elevated trading volume. [Investors Ditching Two Big Junk Bond ETFs]
“We saw various put strategies enacted in TLT options, which traded rather briskly and will likely continue to do so this morning,” Weisbruch wrote. [Treasury ETFs Under Pressure as Yields Rise]
“In related activity, inverse long-bond ETPs were extremely popular yesterday as well, with huge volume upticks in ProShares Short 20+ Year Treasury (NYSEArca: TBF), ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT) and PowerShares DB 3x Short 25+ Year Treasury Bond (NYSEArca: SBND) for example,” he added. “TLT and HYG, along with iShares TIPS Bond (NYSEArca: TIP) are among the net leaders in asset outflows in recent sessions as well, so there is clearly selling pressure present in the fixed income markets that has accelerated in recent weeks.” [TIPS ETF Down After Producer Prices]
ProShares UltraShort 20+ Year Treasury
Full disclosure: Tom Lydon’s clients own TLT, HYG, JNK and TIP.