- U.S. Treasury bonds and related ETFs find support from yield-starved foreign investors
- U.S. Treasuries strengthened, along with Japanese Government Bond, on renewed safe-haven demand
- As yields on foreign government debt slip lower, other highly rated country debt grows relatively more attractive
As yields on international government debt fall to new lows, U.S. Treasury bonds and related exchange traded funds will continue to find support from yield-starved foreign investors.
On Tuesday, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT), which has a 17.75 year duration and a 2.40% 30-day SEC yield, was up 1.3%. The PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ), which has a 27.26 year duration and a 2.77% 30-day SEC yield, rose 1.6%. The Vanguard Extended Duration Treasury ETF (NYSEArca: EDV), which has a 24.6 year duration and a 2.62% 30-day SEC yield, gained 1.7%.
U.S. Treasuries strengthened, along with Japanese Government Bond, on renewed safe-haven demand, with JGB yields dipping to new lows. Yields on Japan’s 30-year sovereign debt plunged 22 basis points to 0.475% after touching a record low of 0.468%, Bloomberg reports.
In comparison, yields on 30-year Treasury bonds were at 2.63%.
“The combination of weak Chinese data and low Japanese yields has precipitated a significant flattening of the curve with the long bond leading the way,” Aaron Kohli, an interest rate strategist at BMO Capital Markets, told Reuters.
As yields on foreign government debt slip lower, other highly rated country debt grows relatively more attractive.