U.S. Markets closed

Skittish Investors Piling Into Pair of Treasury Bond ETFs


With fixed income markets closed yesterday in honor of the Veteran’s Day holiday but with their index linked ETFs trading in the equity markets nonetheless on Monday, it seems appropriate to highlight something in this space today.

One of the largest recipients of new asset inflows in the month of November thus far is that of Intermediate term U.S. Treasury Bond ETFs.

Specifically, ProShares Ultra 7-10 Year Treasury (UST) has reeled in about $681 million so far in November according to IndexUniverse data, largely due to a huge inflow in the first few days of the month from a tactical manager re-balance (for specific color, kindly contact the desk).

It is no secret that since the U.S. elections concluded, stocks have been largely battered and investors have once again found respite in U.S. Treasury bonds as prices there have risen across the board in recent sessions (depressing yields lower and lower).

UST is designed to provide two times the daily leveraged exposure to the Barclays 7-10 Year Treasury Bond Index, and given the recent action in UST, related ETF, the unleveraged iShares Barclays 7-10 Year Treasury Bond (IEF), should also remain in focus here. Meanwhile, iShares Barclays 3-7 Year Treasury Bond (IEI) has gathered $973 million so far this month.

If one looks at simple technicals of either fund, it is obvious that intermediate term treasury bonds have in the few sessions since the U.S. elections and both UST and IEF are on pace to clear their highest price levels since August. With a 30 day SEC yield of only 1.30% in the case of IEF, the recent flows and price action in these intermediate term treasury bonds via UST likely can be translated as institutional investor fear of equities, and the desire to be in more of a “safe haven with some ability to produce yield, albeit a low yield.”

Since UST only averages about 440,000 shares traded daily and nearly 15 million shares traded in just one session at the very beginning of this month, we will be mindful of the action in both UST and IEI heading into next month and ultimately year’s end to see if there is any reversal in sentiment here via observable fund flows.

ProShares Ultra 7-10 Year Treasury

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.