Why Treasury Bond ETFs Are Rising

The Federal Reserve is closely watched by investors, and recent speculation about the raising interest rates has many ready to take action, as bond and treasury bond exchange traded funds (ETFs) will react to a higher rate.

The speculation is that the Federal Reserve may have to raise interest rates sooner rather than later. The 10-year U.S. Treasury yield hit a seven-month high on Monday ahead of fresh supply this week, which also supported the U.S. dollar, reports Kevin Plumberg for the Guardian.

The U.S. dollar edged up, after higher U.S. bond yields and doubts about the speed at which central banks will diversify their dollar reserves have improved its outlook. Meanwhile, investors have their eye on Chinese economic data for clues.

Consumer demand from Asia in Western markets is one area that is watched, as well as domestic demand in China regarding economic conditions despite weak exports.

Susanne Walker and Daniel Kruger for Bloomberg report that 30-year debt fell as traders prepared for the sale of an additional $30 billion in notes and bonds in the next two days. Short-term treasuries fell as speculators and traders were wrong about the interest rates inching higher by the end of this week.

iShares Lehman TIPS Bond (TIP): up 1% year-to-date

SPDR Barclays TIPS ETF (IPE): up 3.8% year-to-date

For full disclosure, some of Tom Lydon’s clients own shares of TIP.

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