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Market Volatility Lifts Treasury Bond ETFs on Growth Concerns

Sovereign debt markets rallied across the globe on new concerns over lowered prospects of future growth rates this past week. Long-term Treasury bond exchange traded funds such as the iShares Barclays 20+ Year Treasury Bond ETF (TLT) are back in focus as investors take advantage of higher bond prices.

Investors are exiting U.S. and European stocks and back into bonds as the outlook over global growth has become cautious. Disappointing economic data out of the U.S. and China has sparked the migration back into bonds. The geopolitical tension in East Asia has also renewed concerns about healthy economic growth. [2012 Was the Year of the Bond ETF]

Sovereign debt markets, of developed economies, are viewed as a safe haven asset during times of market uncertainty, reports Min Zeng for The WSJ.

“Central banks may be bracing for disinflationary pressures,” said Christopher Sullivan, who oversees $2.1 billion as chief investment officer at United Nations Federal Credit Union. “Major central banks will remain accommodative longer than earlier anticipated.” [ETFs for Rising Interest Rates]

Jeffrey Gundlach, one of the leading bond managers, predicted the Treasury rally in early March. He has reversed his stance on government debt while other investor were exiting. He saw the value of the 10-year U.S. Treasury note after yields broke the 2% barrier, relative to other asset classes, reports Jennifer Ablan for Reuters. [ETF Chart of the Day: BOND]

“I bought more long-term Treasuries in the last month than I’ve bought in four years. I am a fan of Treasuries now. I wasn’t a fan of Treasuries in July,” said Gundlach, chief investment officer and chief executive officer of DoubleLine Capital.

TLT is is up 5.8% over the past month, and has a yield of 2.82%. Other U.S. Treasury Bond ETFs include:

  • iShares Barclays 7-10 Year Treasury Bond Fund (IEF) yield of 1.82%; up 2% over the past month

  • Vanguard Long Term Government Bond (VGLT) 2.93% yield; up 5.5% over one month

  • Vanguard Extended Duration Treasury ETF (EDV) 3.87% yield; up 9% over one month

iShares Barclays 20+ Year Treasury Bond ETF

IEF, TLT, ETF, Bond ETFs, U.S. Treasury Bonds
IEF, TLT, ETF, Bond ETFs, U.S. Treasury Bonds

Tisha Guerrero contributed to this article.

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.