As the markets turn risk-off following concerns about Portugal’s Banco Espirito Santo, investors are turning to safe-haven exchange traded funds that track Treasury bonds, gold bullion and the Japanese yen currency.
The CurrencyShares Japanese Yen Trust (FXY) rose 0.2% Thursday, as the yen currency hit a five-month high against the euro and moved close to a two-month high against the U.S. dollar.
The USD per JPY fell 0.3% Thursday and currently sits at around 101.35.
“We’re seeing some problems coming out of Europe,” Sireen Harajli, a foreign exchange strategist at Mizuho Corporate Bank, said in a Reuters article. “Markets are selling euros and buying safe havens like the Japanese yen.”
The iShares 20+ Year Treasury Bond ETF (TLT) increased 0.1% Thursday.
The renewed contagion concerns for peripheral markets is also pushing European investors toward U.S. Treasuries. [ETF Chart of the Day: Problems in Portugal]
“The brewing crisis in Europe has brought demand into the market, as a part of a broader flight to quality that is benefiting 30-year bonds, even with the lowest yields in some time,” Ian Lyngen, a government-bond strategist at CRT Capital Group LLC, said in a Bloomberg article.
U.S. Treasuries were also strengthening after the release of the Fed’s June meeting, which eased speculation of rate hikes any time soon.
“Equities are getting hammered today, and we are seeing a flight to safety,” Frank Lesh, a trader at FuturePath Trading LLC, said in a Bloomberg article. “Concerns about Europe are coming back to the forefront.”
Gold has also been gaining ground this year as geopolitical volatility in Ukraine and Iraq sparked safe-haven demand and after the Federal Reserve signaled it will keep rates low, which spurred some inflation hedging.
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Tom Lydon’s clients own shares of GLD and TLT.