Treasuries and bond-related exchange traded funds advanced Wednesday as benchmark yields tumbled to their lowest since October.
On Wednesday, the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) rose 0.5%, Schwab Intermediate-Term U.S. Treasury ETF (NYSEArca: SCHR) was 0.3% higher, Vanguard Intermediate-Term Government Bond ETF (NYSEArca: VGIT) was up 0.3% and SPDR Barclays Intermediate Term Treasury ETF (NYSEArca: ITE) gained 0.2% as yields on 10-year Treasury bonds fell to 1.99% and briefly touched 1.95% earlier in the day, the lowest since October 2.
Treasury bonds have been rallying as market volatility and the sell-off in global equities pushed investors to safe-haven assets. Year-to-date, IEF rose 2.1%, SCHR gained 1.5%, VGIT increased 1.4% and ITE was 0.5% higher.
Treasury yields pushed lower after a collapse in crude oil prices triggered panic selling in the markets and depressed the inflation outlook, which further bolstered debt assets on improved real yields. A bond-market gauge of inflation expectations, known as the 10-year break-even rate, fell to the least since 2009, Bloomberg reports. [Energy ETFs Plunge as Crude Oil Slips to 12-Year Low ]
The consumer-price index declined 0.1% last month. Excluding food and fuel, the so-called core index was 0.1% higher, less than expected and the smallest rise in four months. Low inflation means that the real yield, or yield after accounting for inflation, is more attractive for fixed-income assets.
Additionally, U.S. debt gained on speculation that the Federal Reserve will struggle to meet its own interest rate hike forecast for the year.