The falling inflation outlook and recent spat of market volatility has helped support a rally in the Treasuries market and bond-related exchange traded funds.
Over the past month, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) rose 6.2%, PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ) increased 10.6% and Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) gained 9.3%. The long-term Treasury bond ETFs are coming up against their 200-day exponential moving average resistance.
For the more aggressive traders, the ProShares Ultra 20+ Year Treasury (NYSEArca: UBT), which takes the 2x or 200% daily performance of long-term Treasuries, was up 12.0% and Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (NYSEArca: TMF), which follows the 3x or 300% performance of long-term Treasuries, advanced 18.6% over the past month.
The number of bearish U.S. government debt investors have declined as crude oil prices fell, reports Alexandra Scaggs for Bloomberg.
In July, commodities have plunged 10%, contributing to the bond market’s inflation forecasts – lower inflation translates to improved real yield for long-term Treasuries.
Consequently, JPMorgan Chase & Co. revealed that the number of clients betting on a fall in government-debt has declined over the past week. Nevertheless, the bears still outnumbered the bulls by 5 percentage points, the last since late February.
“Treasuries had stronger prices almost exclusively because oil started falling again,” Jim Vogel, interest-rate strategist with FTN Financial, told Bloomberg. “It began to indicate that something else was going on, beyond the fallout from global risk” in China and Greece.
The diminished inflation outlook has helped fueled Treasury bond ETF bets. For instance, over the past two weeks, TLT has saw $342.6 million in net inflows and ZROZ attracted $49.8 million in inflows, according to ETF.com.
Meanwhile, the ProShares Short 20+ Year Treasury (NYSEArca: TBF), which aims to deliver the daily inverse performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index, saw $17.1 million in outflows over the past two weeks.
iShares 20+ Year Treasury Bond ETF
For more information on the Treasuries market, visit our Treasury bonds category.
Max Chen contributed to this article.