U.S. Treasuries are taking a cliff-dive today as rates are skyrocketing post Presidential election results.
TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%, $6.7 billion in AUM) is trading at its lowest levels since this Spring, and since violating its 200 day MA eleven trading sessions ago, it has not spent one day above that level.
Clearly, the prospect of “rising interest rates” has weighed on investors’ minds for some time (years on end in fact), and now with a Trump administration coming to a theater near you in the very near term, it seems that many believe an FOMC rate raise in December is now more than just “in the cards.”
The TBT (ProShares UltraShort Barclays 20+ Year Treasury, Expense Ratio 0.92%, $2.1 billion in AUM), as one might expect, is heavily trafficked today in the marketplace on a gap higher on very heavy trading volume.
Also rising today is TMV (Direxion Daily 20+ Year Treasury Bear 3X, Expense Ratio 0.95%, $383 million in AUM) as well as the unlevered TBF (ProShares Short 20+ Year Treasury, Expense Ratio 0.93%, $722 million in AUM). These ETFs will likely continue to see a bid if the weakness here in U.S. Treasuries on rising rate prospects persists.
The weakness in bonds could persist not only through the next FOMC rate decision cycle in December, but perhaps into 2017. TLT has seen moderate inflows year-todate of $127 million, but this number is notionally light considering the >$6 billion asset base in the fund. If today’s huge downswing persists, it will be interesting to see if redemption pressure builds in the fund at all, as TLT is presently the third largest “U.S. Treasury Bond” based ETF in the U.S. listed landscape behind SHY (iShares 1-3 Year Treasury Bond, Expense Ratio 0.15%, $11.3 billion in AUM) and IEF (iShares 7-10 Year Treasury Bond, Expense Ratio 0.15%, $8.6 billion in AUM).
Likewise, TBT, TBF, and TMV have not seen notable inflows year-to-date, but this of course can radically change in time given the short-term trading nature of these products and the volatility that has been introduced into the Fixed Income markets recently.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.