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Inverse Bond Treasury ETF Nears Breakout


One of this year’s most prominent themes has been declining Treasury yields and the subsequent (and substantial) spate of inflows to fixed income exchange traded funds.

The iShares 7-10 Year Treasury Bond ETF (IEF), Vanguard Total Bond Market ETF (BND) and the iShares Core U.S. Aggregate Bond ETF (AGG) each rank among the top-10 ETFs for 2014 inflows with the bulk of those new assets to those funds and other bond offerings coming courtesy of institutional investors. [Bond ETFs Bulk Up]

That is to say dancing with inverse Treasury ETFs has proven hazardous to investors’ health this year. With a year-to-date loss of 20%, the ProShares UltraShort 20+ Year Treasury (TBT) proves as much, but there are signs a near-term rise in rates could be in the offing meaning TBT could be poised to rally. [Inverse Bond ETFs: Risky Bets]

“TBT looks to be reversing off an important support level around $60, formed by the prior lows of 2012 and 2013,” notes Deron Wagner of Morpheus Trading Group. “The daily chart shows the recent downtrend line breakout and successful test of the same trendline this week. The price action also held the 20-day EMA which is beginning to flatten out.”

Despite TBT’s struggles and those of other inverse Treasury ETFs, traders are not only sticking by these ETFs, they are allocating new capital to what has been a losing bet to this point in 2014. TBT has pulled in almost $210 million in new assets just this quarter. [Leveraged Treasury ETFs]

Regarding TBT “if the price action can push through the swing high and 50-day MA, then we could potentially see a multi-week bounce into the $68 – $70 level, where there is resistance from the last base that formed back in February,” adds Wagner.

TBT is up 2.3% this month while the Direxion Daily 20-Year Treasury Bear 3X Shares (TMV) is higher by 3.3%.

ProShares UltraShort 20+ Year Treasury


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.