Treasury ETFs Surge as Investors Hedge Ukraine Risks
Treasury bond exchange traded funds jumped on safe-haven demand Friday after lackluster economic data fueled bets that the Federal Reserve would hold off rate changes and on reports that Ukraine attacked the Russian armored convoy, raising fears of retaliation.
The Vanguard Extended Duration Treasury ETF (EDV) , which has an effective duration of 24.9 years and a 3.31% 30-day SEC yield, rose 2.1% Friday while the iShares 20+ Year Treasury Bond ETF (TLT) , which has an effective duration of 16.7 years and a 3.08% 30-day SEC yield, was up 1.2%. Year-to-date, TLT is up 16.4% and EDV is up 25.4%. [Bond ETFs Still Provide Suitable Risk-Adjusted Returns]
For the more aggressive trader, the Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (TMF) , which reflects the daily 300% performance of long-term Treasuries, increased 3.5% Friday.
Benchmark 10-year Treasury yields fell to as low as 2.32% Friday, the lowest level since June 2013, after Ukrainian troops fired on a Russian convoy that has been seen entering Ukraine from Russia, Wall Street Journal reports. Yields and bond prices have an inverse relationship, so a falling yield corresponds with higher prices. [Considering Core Intermediate Bond ETFs]
Longer-dated bonds are attracting more attention as they provide higher yields compared to short-term notes.
The yield on 30-year bonds touched a session low of 3.106%, their lowest since May 2013, Reuters reports.
Government bond also strengthened earlier in the morning, following the U.S. economic releases that revealed tepid activity, which fueled speculation that the Fed would be patient in hiking rates.
Specifically, the producer-price index for final demand was up 0.1% in July month-over-month, compared to expectations for a 0.2% increase. Additionally, a gauge for manufacturing conditions in the Northeast region softened and an index of consumer confidence for mid-August dipped.
Vanguard Extended Duration Treasury ETF
For more information on the Treasuries market, visit our Treasury bonds category.
Max Chen contributed to this article.
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