Treasury ETF

With equities softening in recent sessions, long term Treasury bond prices which have historically served as a “risk off” indicator, have staggered lower as well. TLT (iShares Barclays 20+ Year Treasury Bond, Expense Ratio 0.15%) is trading at fresh new lows this morning with a $112 handle once more, the lowest price levels since the spring of 2012.

The fund itself has seen more than $300 million leave the door in recent sessions, and there has been well documented selling pressure recently in many corners of the fixed income markets, not just treasuries (International Fixed Income, High Yield Corporate, Investment Grade Corporate, etc.) as market participants begin to re-examine fixed income portfolios given where we are with the QE and stimulus programs.

As one might expect, with TLT falling to fresh new lows and violating and kind of technical trend-line support, bearish trend following investors have joined the fray lately as well, and we have observed not only TLT outright and put spread buying for some time now, but notable inflows into bearish/inverse ETPs in the long term treasury bond space.

Specifically, TBT (ProShares UltraShort 20+ Year Treasury Bond, Expense Ratio 0.95%) has been very active, breaking through a $71 handle this morning and at its highest levels since the spring of 2012 as well, having pulled in north of $700 million in assets YTD, and +$55 mln in recent sessions.

TBT is designed to deliver two times the daily inverse return of long term U.S. Treasury Bond prices, and related ETF, the un-levered inverse TBF (ProShares Short 20+ Year Treasury, Expense Ratio 0.95%) has also had its day in the sun recently, taking in $50 mln in the past few sessions and a total of $351 mln YTD. Keep in mind the total fund sizes here, TBF as $1.14 billion and TBT $3.8 billion, and one can quickly see that the recent and YTD asset flows here, are certainly notable in the context of what is typically “in play” with these funds.

Other inverse funds that are active here are TMV (Direxion Daily 20 Year Plus Treasury Bear 3X, Expense Ratio 0.95%), which has attracted +$100 million YTD, and to a lesser degree, SBND (PowerShares DB 3X Short 25+ Year Treasury Bond ETN, Expense Ratio 0.95%).