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Treasury ETFs Weak as 10-Year Yield Above 2% Before Auction


The iShares Barclays 20+ Year Treasury Bond Fund (TLT) was lower in Wednesday’s premarket as investors keep a close eye on rising yields and what it means for the U.S. economy and stock market.

Yields on the 10-year note traded above 2% Wednesday morning as investors digested reports on retail sales as well as import and export prices.

The Commerce Department said U.S. retail sales rose 0.1% in January on a seasonally adjusted basis.

Also Wednesday, the government will auction $24 billion of 10-year notes in the afternoon.

“The market is feeling supply pressure but there is still a lot of cash on the sidelines and buying when the 10-year yield rises above 2% has been a successful strategy,” said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co., in a Dow Jones Newswires report.

“Bond yields might drop if investors cash out of stocks over concerns the rally so far this year in equities might have been overdone,” the newswire said. “On the other hand, bond yields may be pushed higher if upcoming economic releases, especially in the U.S. and China, continue to support a view that the global economy will fare better this year.”

TLT, the long-term Treasury ETF, is down about 7% the past three months. Bond yields and prices move in opposite directions. [How Rising Interest Rates Would Impact Top-Selling Bond ETFs]

Yields on the 10-year note are trading near a 10-month high.

“Treasury yields will go higher,” said Mohit Kumar at Deutsche Bank in a Bloomberg report. “Economic data is coming out better. The Fed will signal a pause in asset purchases at some point before the year-end.”

iShares Barclays 20+ Year Treasury Bond Fund


Full disclosure: Tom Lydon’s clients own TLT.

The opinions and forecasts expressed herein are solely those of John Spence, 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.