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Treasury ETFs Soften on Lower Jobless Claims, Stock Rally


Despite the Fed’s determination to stick with its easing program, Treasury bond exchange traded funds weakened as rates spiked and investors turned to the “risk-on” trade.

The iShares Barclays 20+ Year Treasury Bond ETF (TLT) fell 2.0% Thursday. TLT has declined 9.9% year-to-date.

The yield spread between 2- and 30-year Treasuries reached 342 basis points, its widest on a closing basis since August 2011, Bloomberg reports.

Yields on benchmark 10-year Treasury bonds rose over 10 basis points, touching 2.7% Thursday. Yields on 30-year Treasuries were at about 3.74%.

The U.S. Labor Department said that the number of Americans filed for unemployment claims fell to 326,000, a five and a half year low, reports Ellen Freilich for Reuters. The Labor Department will announce the July jobless rate Friday, August 2.

“Bond prices are suffering losses as traders are using this surprise drop in jobless claims to set up short Treasuries positions for tomorrow’s jobs report,” Thomas di Galoma, one of the heads of bond trading at ED&F Man Capital Markets, said in the Reuters article.

The risk-on environment helped push the S&P 500 Index over 1,700 for the first time. [Stock ETFs Rally as S&P 500 Crosses 1,700]

“The market has a risk-on tone with stocks up and Treasuries taking a hit as the better data this week has led people to the conclusion that the labor market is doing better,” Larry Milstein, managing director at R.W. Pressprich & Co, said in the Bloomberg article. “The Fed has reiterated the view that they remain strongly data-dependent, and if that’s the case, better data will means tapering sooner than later.”

Given the modest pace in the economic recovery, though, the Federal Reserve reaffirmed its “highly accommodative stance” Wednesday. [Accommodative Fed Measures to Support Stock Market, ETFs]

Meanwhile, inverse Treasury bond ETFs moved higher on the weakening in Treasuries. The ProShares UltraShort 20+ Year Treasury ETF (TBT) gained 3.3% Thursday and the Daily 20+ Year Treasury Bear 3X Shares (TMV) rose 5.1%. [Inverse Treasury ETFs Capitalize on Rising Interest Rates]

iShares Barclays 20+ Year Treasury Bond ETF

For more information on Treasuries, visit our Treasury bonds category.

Max Chen 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.