The anticipation of higher interest rates has recently sparked an uptick in volatility in ETFs such as TLT. Earlier this month, TLT’s implied volatility touched its highest levels in 13 months. [Volatility in Treasury ETFs Spikes]
Investors have also added billions to total bond market ETFs that are heavy on Treasuries. For example, the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG) and the Vanguard Total Bond Market ETF (NYSEArca: BND) have added over $5.8 billion in new assets combined. AGG allocates 37% of its weight to Treasuries while BND has a 42% weight to Treasury and agency debt, according to Vanguard data.
Although Treasuries have been a popular and rewarding asset class this year, some traders have tempted fate, opting to establish bearish positions against government bonds via select ETFs. The ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT), a double-leveraged bet against longer-dated government bonds, has added $1.24 billion in new assets. TBT’s triple-leveraged rival, the Direxion Daily 20-Year Treasury Bear 3X Shares (NYSEArca: TMV), has seen inflows of $270.2 million. [For the Daring, Short Treasury ETFs]
iShares 20+ Year Treasury Bond ETF
Tom Lydon’s clients own shares of TLT and EFA.