The next great short is apparently happening sooner than many market participants expected. As interest rates rise, investors are starting to get their heads handed to them if they were in longer-dated Treasury notes and bonds. The so-called long bond was down about a full point, or 1% in market prices, and the 30-year yield is now at a high not seen in over a year.
Today’s move is a continued global sell-off of Treasury notes and bonds after the Bank of Japan held back on a new round of asset buying on its own inflating mission. The long bond hit a yield of 3.427% after rising five basis points. We saw a new high of 3.43%, making this the highest long bond yield going back to April of 2012. The 10-year Treasury note also hit 2.27% on Tuesday morning, also a high in yields not seen since April of 2012.
The ProShares UltraShort 20+ Year Treasury (NYSEMKT: TBT) aims to be double-short the price of the daily performance (intraday that is) of the Barclays U.S. 20+ Year Treasury Bond Index, and shares are hitting yet another 52-week high at $70.24 so far this morning, with gains of almost 0.5%. This leveraged ETF aims to rise with interest rates, while other bond tracking ETFs and ETNs drop in price with bonds as interest rates rise.
As a reminder, a fairly rapid rise of 1% in rates on the 30-year Treasury bond can eat up more than 15% of face value in the market price of that bond. That means that almost five years worth of long bond interest payments were taken out of the face value.
We also are seeing a new 52-week low on the iShares JPMorgan USD Emerging Markets Bond (NYSEMKT: EMB) exchange-traded product. This is down 1.2% in price to a new 52-week low of $110.85.
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