Even with rising Treasury yields, investors have remained loyal to these rate-sensitive ETFs. Since Jan. 30, VNQ has added over $95 million in new assets while $163.5 million has flowed into XLU. Investors have poured over $406 million into TLT.
Additional rate trouble can be seen with investors’ recent treatment of longer duration bond ETFs. After starting 2015 extending their surges from 2014, hitting a series of all-time highs in the process, the PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ) and the Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) have each lost 7% since Jan. 30.
As the ETFs’ names imply, these are longer duration funds, meaning they are more sensitive to changes in long-term interest rates. If and when the Fed finally raises rates, it will most likely be short-term rates. [Bond ETF Stars Try to do it Again in 2015]
Chart Courtesy: Kimble Charting Solutions
Tom Lydon’s clients own shares of TLT.