U.S. Treasury bond exchange traded funds maintained their momentum Monday, with yields on benchmark 10-year notes nearing record lows, as investors continued to jump into safe-haven assets following the United Kingdom’s vote to leave the European Union.
The PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ) was among the best performing non-leveraged ETF Monday, surging 4.7%.
Meanwhile, yields on benchmark 10-year Treasury notes declined by 12.4 basis points to 1.456% mid-Monday. The yield’s record closing low was 1.404% on July 2012.
Investors have been shifting to safety plays from riskier assets in a bid to preserve capital as a result of the U.K.’s decision to break away from the E.U.
“The bond market is saying that the risk to global [economic]growth has increased,’’ Aaron Kohli, interest rate strategist at BMO Capital Markets, told the Wall Street Journal. “There are many questions about how [the Brexit issue]actually is going to evolve.’’
Related: Brexit Uncertainty Will Help Support U.S. Treasury Bond ETFs
Moreover, depressed yields overseas, where some government debt is already trading at negative yields, have also pushed more foreign investors into relatively more attractive U.S. Treasuries.
[related_stories]Traders are also expecting the Federal Reserve to hold off on any further interest rate hikes in response to the uncertainty, especially if U.S. growth momentum slows, which should help support fixed-income assets. Fed funds futures – a popular tool to place bets on the Fed’s future policy moves – showed a 6% probability that the Fed may even cut interest rates this year.
Related: Safety ETF Plays Rally on Brexit Concerns
The Brexit vote “provides rationale for central banks to run a looser policy,’’ Steven Major, global head of fixed-income research at HSBC Holdings PLC, told the WSJ. “For the U.S., the hikes have been correctly priced-out.”
Bond investors interested in Treasury bond exposure have a number of ETF options available.
Intermediate-Term Treasury ETFs:
- Vanguard Intermediate-term Bond ETF (NYSEArca: BIV)
- iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF)
- iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI)
- Vanguard Intermediate-Term Government Bond ETF (NYSEArca: VGIT)
- Schwab Intermediate-Term U.S. Treasury ETF (NYSEArca: SCHR)
- SPDR Barclays Intermediate Term Treasury ETF (NYSEArca: ITE)
Long-Term Treasury ETFs:
- iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT)
- iShares 10-20 Year Treasury Bond ETF (NYSEArca: TLH)
- Vanguard Extended Duration Treasury ETF (NYSEArca: EDV)
- Vanguard Long Term Government Bond (NasdaqGM: VGLT)
- SPDR Barclays Long Treasury (NYSEArca: TLO)
- PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ)
For more information on the Treasuries market, visit our Treasury bonds category.