Investors are abandoning the exchange traded fund (ETF, for its acronym in English) dedicated to the Treasury bond at the fastest speed since the markets they were beaten during the first months of the pandemic in 2020.
More than US$1.8 billion left the iShares 20+ Year Treasury Bond ETF (code TLT) of $39 billion last weekthe highest figure since March 2020, according to data compiled by the agency Bloomberg. The price of the fund had fallen more than 3% the week before and another 1.2% in the five-day period ending Friday.
Winnie Cisarglobal head of credit strategy for CreditShightsit could be that investors are releasing cash and abandoning products like that ETF, all in the face of increased supply, while the US government faces deficits getting older.
key to investments
The trust in the treasury securities long worsened in the last month because there is more and more certainty that the Federal Reserve (Fed) will continue with its aggressive monetary policy of high rates in the middle of his fight inflation.
This led to a sharp rise in US debt yields in the longer term, which ended up reducing demand during the sale of 30-year treasury notes which was executed last week.
“It could also be a delayed reaction/acceptance of the bearish view of performance which intensified, after the combination of the reduction fitchthe higher than expected UST redemption and the BoJ announcements,” says Cisar.
Yields on 10-year and 30-year Treasury bills are around the highest levels since November. Last month’s selloff hit longer-term debt harder than shorter-term maturities, spurring a recovery in the still deeply inverted segments of the yield curve.
“I’m probably still more concerned about us retesting those highs from last fall than the downside risks here to yields,” he adds. Erik Nelson of Wells Fargo to Real Yield from the agency Bloomberg. “I don’t necessarily expect 50 basis points up here, but I think the carry and upside risks here make don’t be too temptingin our opinion, to take long positions at this time,” he concludes.
What is an ETF?
It is a set of assets listed on the stock Exchange. ETFs are vehicles that help investors diversify their bets at a low cost.
By incorporating these instruments into an investment portfolio, investors can be benefited of instant diversification, because they offer greater diversity than what obtained by buying a particular sharesince it brings together different assets such as stocks, bonds and raw materials in the same lot.
Source: Ambito
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