Still, the sensitivity of the aforementioned ETFs and their holdings to Treasury yields will continue to figure prominently in the funds’ near-term performance. Consider this: Over the past month, seven of KBWI’s top 10 holdings, a group that combines for over 60% of the ETF’s weight, have traded higher. Two of three stocks that are not are not up over that time are down just 0.16% and 0.2%, respectively.
Despite the obvious weighting differences, IAK and KIE performed nearly in-line with each other in 2013 when Treasury yields soared. S&P Capital IQ rates both ETFs overweight.
Interestingly, investors appear unwilling to commit to the idea that Treasury yields can keep rising. Money has been pulled from KIE and the SPDR S&P Regional Banking ETF (NYSEArca: KRE), the rate-sensitive regional bank ETF this year, while TLT and XLU, which are being pinched by rising Treasury yields, have added over $2 billion in new assets combined. That could be a sign that KIE is a contrarian bet, from a flows perspective, and poised to keep rising in the near-term.
SPDR S&P Insurance ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of TLT.