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Investors Hedge Against Trade Talks with Treasury Bond ETFs

This article was originally published on ETFTrends.com.

As the U.S. and China trade deals talks extend, wary investors are piling into Treasuries and related ETFs to hedge bets in case an unexpected fallout occurs.

U.S. government debt yields continued to dip Friday as the trade talks continued. Yields on benchmark 10-year Treasury notes dipped to 2.655% late Friday. Bond yields move inversely with their bond prices.

Investors have also been turning to Treasury bond-related ETFs as a quick way to gain access to this segment of the fixed-income market. The iShares 7-10 Year Treasury Bond ETF (IEF) was the most popular ETF play over the past week, attracting close to $1.5 billion in net inflows, according to XTF data. Treasury bonds have remained popular plays this year, with IEF adding $2.9 billion in new inflows and iShares 20+ Year Treasury Bond ETF (TLT) seeing $2.5 billion in inflows year-to-date as well.

Market observers continued to closely watch the latest round of negotiations between Washing and Beijing. While many are optimistic that a trade deal will pass, some warn that the most difficult hurdles will come ahead as high level talks pushed through on Friday.

"There's obviously an incentive for both sides to reach a deal," James Athey, senior investment manager at Aberdeen Standard Investments, told CNBC. "The problem is that you're now getting to the more difficult part of the negotiation, which is things like the IP (intellectual property) problem."

President Donald Trump has been butting heads with Beijing over stolen intellectual property and trade secrets from American companies, notably those in the tech segment.

As both countries are a week away from an early march deadline to reach a trade deal, some warn that they may extend beyond the deadline.

For more information on the fixed-income market, visit our bond ETFs category.

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