ETF Chart of the Day: Bond Bubble

Long dated Treasury Bonds are having a tough time in the early going today, as we see TLT (iShares Barclays 20+ Year Treasury Bond, Expense Ratio 0.15%) getting blitzed at its 200 day MA for the first time in recollection.

TLT has had a rather rough month in terms of flows as well, as we see >$540 million leaving the fund via redemptions in the trailing one month period. TLT is the largest ETF in the “Long-Term” Bond category, with north of $5.9 billion in AUM, and the 10% of float migration out in the trailing one month certainly is interesting.

A well -known “Bearish Long Bond” play, TBT (ProShares UltraShort Barclays 20+ Year Treasury, Expense Ratio 0.95%) has seen >$100 million flow into the fund in the trailing one month, which is notionally small given the fund’s asset base of about $3 billion, making it the third largest fund in the Long Term Bond space.

It is always interesting to see a levered bear fund in any given ETF category that is significantly bigger than dozens of long only offerings, as it shows the sentiment that sometimes prevails in the space in terms of market participant directional calls. Likewise, TBF (ProShares 20+ Year Short Treasury, Expense Ratio 0.93%) which is an unlevered bear fund betting against higher Treasury Bond prices, is also substantial in size, with an AUM of
$942 million.

TMV (Direxion Daily 20 Year Plus Treasury Bear 3X, Expense Ratio 0.95%), another Bear fund that is well known in the space has $472 million in AUM. In terms of other Long only funds here that will likely be in motion given the Treasury Bond blitz (lower prices, higher yields) are BLV (Vanguard Long Term Bond, Expense Ratio 0.10%) and EDV (Vanguard Extended Duration Treasury, Expense Ratio 0.12%) which have $1.2 billion and $431 million in assets under management respectively.

Will the bleeding at the 200 day stop for TLT and the underlying long dates U.S. Treasury bonds that it tracks is the question at this juncture, but we would have to expect the huge trading volume and interest in the
space that we have seen in recent days as well as the continued embrace of leveraged long and short ETFs to continue in the near term.