Tuesday saw another losing session for the Dow Jones Industrial due to coronavirus fears causing a safe haven asset bonanza, which caused the 10-year Treasury yield fell to a record low.
Per a CNBC report, “the yield on the benchmark 10-year Treasury note, which moves inversely to price, fell about more than 5 basis points to 1.32%, below its previous record low of 1.325% set on July 6, 2016, in the aftermath of Brexit.”
The longer end of the yield curve also felt the pangs of the stock market drop.
“The yield on the 30-year Treasury bond tumbled more than 3 basis points to a new all-time low of 1.798%,” the report added. “The long-duration rate has plunged about 40 basis points this year.”
As fears of a global pandemic continue to pressure yields lower, traders are now betting on the possibility of a rate cut at the Federal Reserve’s April meeting.
“The futures market is currently pricing in a Fed rate cut this summer as our Treasury market chases the global fixed income market to zero,” said Andrew Thrasher, founder of Thrasher Analytics. “I’m not one who believes we’ll see negative rates in the U.S., but with global investors chasing after U.S. assets, specifically fixed income, there’s significant pressure on rates to stay low.”
If you’re bullish on bond-backed ETFs, then it’s a prime opportunity to capitalize on these funds if a sustained safe haven flight persists. In particular, investors can look at the iShares Short Treasury Bond ETF (NasdaqGM: SHV).
SHV seeks to track the investment results of the ICE U.S. Treasury Short Bond Index, which measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of equal to or greater than one month and less than one year. Additionally, the fund may invest up to 10% of its assets in U.S. government bonds not included in the underlying index, but which BFA believes will help the fund track the underlying index.
SHV provides:
- Exposure to U.S. Treasury bonds that mature in less than 1 year
- Targeted access to a specific segment of the U.S. Treasury market
- Use to customize your exposure to Treasuries
Investors can also take a look at the iShares 20+ Year Treasury Bond ETF (NasdaqGS: TLT). TLT seeks to track the investment results of the ICE U.S. Treasury 20+ Year Bond Index (the “underlying index”). The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to twenty years.
Advantages of adding TLT to your portfolio:
- Exposure to long-term U.S. Treasury bonds
- Targeted access to a specific segment of the U.S. Treasury market
- Use to customize your exposure to Treasuries
For more market trends, visit ETF Trends.