Treasury bond exchange traded funds are rallying for the third day as benchmark yields hit a 10-month low and Treasuries head toward their fifth month of gains.
The iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) rose 0.5% Wednesday while the later-dated iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) increased 1.1%. Year-to-date, IEF is up 5.2% and TLT is 12.4% higher. [Bond ETF Bounty]
Treasuries are moving toward their longest monthly advance since 2006, Bloomberg reports.
Benchmark yields on 10-year Treasuries dipped to 2.44%, the lowest yield since July. The yield on 30-year bonds fell to 3.29% Wednesday, its lowest since June. In contrast, 10-year yields started the year off near 3% while 30-year yields were close to 4%. [Short-Covering, Easing Speculation Pushes Treasury ETFs to New Resistance]
U.S. government bonds are becoming more attractive on a relative basis after speculators drove down European bond yields ahead of the European Central Bank meeting next week.
“The Treasury bond move is a part of a global bond rally amid a monetary policy landscape of central banks that are easing or looking to ease further,” Andrew Brenner, the head of international fixed income at National Alliance Capital Markets, said in the Bloomberg article. “With German data weaker this morning, there has been a lot of buying of bunds that has spilled over into the Treasury market.”
The unexpected rise in Germany’s unemployment numbers pushed European investors into German bunds, with yields dropping to 1.35%, and U.S. Treasuries.
“For now, it’s really been led by bunds, which have room to rally to 1.29 percent,” Carl Lantz, head of interest-rate strategy at Credit Suisse Group AG, said in the article. “That has us cutting through the 2.47 technical level in 10s. It hasn’t really paid to fight the technicals this year because often they speak to underlying changes in flows or themes that aren’t immediately obvious.”
Looking ahead, Treasury bond traders will be looking for an improving May unemployment report on June 7, which could push yields back up.
iShares 7-10 Year Treasury Bond ETF
For more information on the Treasuries market, visit our Treasury bonds category.
Max Chen contributed to this article.