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ETF Trading Report: Treasury Bond, Financial ETFs In Focus

Eric Dutram

U.S. stocks rose pretty much across the board to start May as investors cheered the positive results from the ISM Manufacturing Index report. In this release, the key indicator hit 54.8, well above the consensus of 53.0 and roughly 1.4 points greater than what analysts saw in the prior reading.

Thanks to this, industrial firms marched higher, while banks and oil companies also saw strength in today’s session. Tech and health care were weak, but their sessions were more than cancelled out by the strong showing in the industrial and financial corners of the economy.

In total, the Nasdaq lagged with just a 0.1% gain while the Dow—up 0.5%-- and the S&P 500—up 0.6%-- led the way higher for the major benchmarks (see Pain In The Spain ETF Continues).

Currency and bond markets were mixed yet again, as the dollar added a few basis points against many of the world’s major currencies, but especially against the yen, although it was weak against the Aussie dollar. The 10 year did see yields move up by a few basis points as the benchmark note added three bps to finish at the 1.95% level.

Commodity markets were also positive, as natural gas continued to soar higher, although the rest of the energy sector only managed modest gains. Softs were also a big winner on the day—led by cocoa and coffee—although orange juice and wheat saw heavy selling pressure to start the month.  

In terms of ETF volume, trading was still light in many of the top products that dominate the industry’s AUM. However, many of the sector products, those following natural gas, and more specialized global products all saw outsized trading on the day.

One ETF in particular that saw a surge in volume was the iShares S&P Global Financial Sector ETF (IXG). This product usually sees light trading of just under 47,000 shares a day but saw a massive spike to over 850,000 shares to open up the month (also see Three Financial ETFs Outperforming XLF).

The reason for this huge jump was unclear, although the product does serve as a nice global barometer for the financial industry, holding assets across a wide number of nations. American financials were generally strong on the day while foreign firms did also see large gains as well.

In fact, Lloyd’s Banking Group and UBS led the foreign firms higher in this space, adding, respectively, 8.2% and 2.4% on the day. Partially thanks to this, IXG added about 0.8% in the session and saw trading interest that reached an unheard of level for this corner of the ETF world.

Another ETF that had a huge spike in trading was the iShares Barclays 3-7 Year Treasury Bond Fund (IEI). The product usually sees trading of about 265,000 shares in a normal session but saw volume surge to over 5.3 million shares in Tuesday’s trading (See Three Bond ETFs For A Fixed Income Bear Market).

This bump came as a number of other bond ETFs saw large moves in terms of volume, but especially those at the shorter end of the curve. In fact, the second biggest mover in terms of outsized volume in the Treasury ETF market was SHY, a product with a one to three year focus.

Seemingly, traders are looking to position themselves in the shorter duration side of the Treasury market ahead of some important economic data later in the week. However, it should be noted that both IEI and SHY finished the day slightly in the red so it is debatable what investors can glean from this move, although it is certainly something to keep an eye on as the week progresses.

(see more in the Zacks ETF Center)

Read the analyst report on SHY

Read the analyst report on IEI

Read the analyst report on IXG

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