To say that Treasury Bonds, especially longer durations, took a beating following Trump’s election to the Presidency last November is probably an understatement.
In ETF land, the “benchmark” name in the long duration Treasury space, TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%, $5.3 billion in AUM) was trading north of $129 before the election results, and it gapped down sharply (amid rapidly rising interest rates over several weeks) before stabilizing somewhat in mid-December of last year, bringing it ultimately to today’s levels.
TLT actually traded at a 52-week low of $116.80 last December before rebounding above $121 on a nice gap up this morning, amid falling rates. The fund has spent four trading sessions consecutively pivoting on its 50 day moving average, including today’s breakout to the upside. We do know course that the FOMC raised rates back in January, but declined to do so during the February meeting last week, and perhaps investors once again believe that another rate raise is unlikely any time soon. Thus, they’re willing to bid up Treasuries a bit here.
We also witnessed some activity in out-of-the-money upside calls in TLT involving March 127 calls which are approximately 4% OTM at present levels. Rates and bond prices surely can move rapidly however, and often in one direction at times, as witnessed last November, so to say that we should not watch these options and further trading in TLT options would be foolish.
TLT has seen rather modest flows year-to-date, with $68 million entering the fund via creations and interestingly the TBT (ProShares UltraShort Barclays 20+ Year Treasury Bond, Expense Ratio 0.95%, $2.1 billion in AUM) has also seen modest net inflows year-to-date, and this fund is often used by traders and portfolio managers whom are positioning bearishly against the long bond.
Levered “Bull” Treasury Bond products are significantly smaller than any of the Inverse names such as TBT, but given the recent move higher in Treasuries amid TLT call buying, we are watching TMF (Direxion Daily 20+ Year Treasury Bull 3X, Expense Ratio 0.95%, $70.5 million in AUM) and UBT (ProShares Ultra 20+ Year Treasury Bond, Expense Ratio 0.95%, $40.4 million in AUM) closely here.
The ProShares UltraShort 20+ Year Treasury ETF (NYSE:TBT) was trading at $38.67 per share on Wednesday morning, down $0.87 (-2.20%). Year-to-date, TBT has declined -5.27%, versus a 2.41% rise in the benchmark S&P 500 index during the same period.
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.