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ETF News And Commentary

Eric Dutram

ETF Trading Report: Hong Kong, Treasury ETFs in Focus

ZROZ EWH

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American equity markets surged higher in Friday trading as a better-than-expected jobs report helped to raise broad hopes about the economy. Nonfarm payrolls saw a 163,000 m/m change, crushing the consensus which called for a 100,000 job increase, greatly boosting the market’s prospects as we head into the weekend.

Thanks to this relatively bullish report, stocks soared in the U.S. with the Dow adding about 1.7%, the S&P 500 gaining 1.9% and the Nasdaq adding a full two percent on the session. Gains were led by the banking and consumer sectors but total moves higher were pretty widespread; green outnumbered the red by a roughly 4 to 1 margin during Friday’s session.

This broad risk on trade was bad news for the dollar though, as the currency slumped against the euro by almost two cents while one cent losses were seen against the pound and Aussie dollar as well. This also filtered over into Treasury bonds as investors headed for the exits in U.S. debt as yields on the Ten year hit the 1.57% level, a nine basis point increase (see Three Resilient European ETFs).

Unsurprisingly, this was also great news for the commodity markets, as broad natural resource indexes surged on the day. Softs were again big winners, led by a 4% jump in cotton, while crude oil was arguably the biggest gainer, adding $4/bbl. or nearly 4.8% to close out the week.

In ETF trading, volume was moderate across most products, with the top index ETFs trading roughly in line with historical averages. Investors did see slightly above-average volume in a number of fixed income funds, however, global sector products were thinly traded to close out the week.  

In particular, investors saw a big volume day for the iShares MSCI Hong Kong Index Fund (EWH - ETF report). The product usually does about 2.8 million shares in volume but experienced 7.2 million shares of trading during Friday’s session (read Hong Kong ETF Investing 101).

Interestingly, the huge volume day came just a few sessions after ETF Channel discovered a large inflow into the space, nearly 1.7% of the total outstanding units. This increase in assets as well as the product’s solid performance of a 1.8% gain today, helped to push EWH back onto the radars of many investors to close out the week.

Another fund that was in focus was the PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - ETF report). This long-duration fund usual has volume of about 31,000 shares in a normal day but saw more than 410,000 shares change hands during Friday’s trading (see Is The Bear Market for Bond ETFs Finally Here?).

A big reason for this increase in interest was undoubtedly the volatility in the Treasury market today. Investors saw 30 year bonds add about nine basis points on the day, moving yields up to the 2.64% mark. This pushed down ZROZ by about 2.7% on the session, making the fund in focus for many bond traders during the week’s final session.

(see more in the Zacks ETF Center)

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