This article was originally published on ETFTrends.com.
In a year marked by increased interest rate hikes, Treasury bonds and related exchange traded funds still managed to rally toward the end of the year as market volatility and uncertainty pushed investors into safety bets.
Over the past three months, the iShares 7-10 Year Treasury Bond ETF (IEF) gained 2.7% and iShares 20+ Year Treasury Bond ETF (TLT) rose 3.1% as yields on benchmark 10-year Treasury notes dropped back down to 2.74% after reaching as high as 3.22% back in October.
U.S. Treasuries are leading the advance in global bonds as lingering global growth concerns added on the skepticism over the recent risk-asset gains, which fueled demand for the traditional safe-haven play, Bloomberg reports.
Bonds have been strengthening again on Thursday as the global equity rally stumbled, with U.S. stock-index futures retreating while shares in Europe and Asia were mixed, after Wednesday's most impressive surge in broad stock market indices since 2009.
Meanwhile, as U.S. Treasuries strengthened, yields on benchmark 10-year U.S. notes dipped toward their lowest level since April.
"The market traded well overnight as equities came off and it feels like a little bit of a bid here,” Justin Lederer, an interest rate strategist at Cantor Fitzgerald, told Reuters.
Bonds are strengthening with policy uncertainty “putting pressure on equities,” Antoine Bouvet, an interest-rates strategist at Mizuho International Plc, told Bloomberg. There is “little prospect for this uncertainty to abate in the near term. Month-end flows should be supportive in illiquid markets” for debt.
The recent political risks compounded investor fears in recent trading sessions. In Washington D.C., a partial government shutdown continues. Furthermore, President Donald Trump repeatedly criticized the Federal Reserve over its interest rate hikes.
For more information on the fixed-income market, visit our bond ETFs category.
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