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Yields Rise on Middle East Crisis: Inverse Treasury ETFs to Buy
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Key Takeaways
Rising Treasury yields could lift inverse bond ETFs as bond prices weaken.
Middle East tensions may keep oil and inflation elevated, supporting higher yields.
TBT, TMV, TBF and TBX offer bearish exposure to Treasury bond prices.
U.S. Treasury yields moved higher across the curve on Tuesday as investors weighed escalating tensions in the Middle East alongside reports that fresh mediation efforts could help curb the ongoing conflict.
The benchmark 10-year Treasury yield rose more than 3 basis points to about 4.63%. The policy-sensitive two-year Treasury yield gained over 4 basis points to around 4.26%, while the 30-year Treasury yield edged up to roughly 5.13%, as quoted on CNBC.
Since bond prices and yields move in opposite directions, the rise in yields reflected cautious investor sentiment.
Ceasefire Hopes Help Limit Market Volatility
According to BMO Capital Markets, the Treasury market has remained relatively stable despite heightened geopolitical tensions.
Reports that mediators have introduced new ceasefire proposals helped cool oil prices, preventing a sharper selloff in government bonds. However, analysts cautioned that market sentiment remains highly sensitive to developments surrounding the Iran conflict.
Energy Prices Could Drive Bond Market Moves
Any decline in Treasury yields could be limited as investors continue to monitor oil markets and the broader geopolitical landscape. Note that if the U.S.-Iran war continues and the key waterway Strait of Hormuz remains under pressure, energy prices will keep rising, which would be enough to stoke global inflation materially.
Amid persistent inflation, global central banks may likely be forced to hike rates. In that case, bond yields will rise, and bond prices will slump.
Global Bond Markets Also Under Pressure
Government bond yields also moved higher in the United Kingdom after newly appointed prime minister Andy Burnham indicated he would adopt a more flexible approach to the country's fiscal rules.
ETFs to Play
Against this backdrop, below we highlight a few inverse treasury-based exchange-traded funds (ETFs).
ProShares UltraShort 20+ Year Treasury (TBT - Free Report) – Up 5.24% past month, Up 1.3% past week
Direxion Daily 20+ Year Treasury Bear 3X ETF (TMV - Free Report) – Up 7.8% past month, Up 2.1% past week
ProShares Short 20+ Year Treasury (TBF - Free Report) – Up 2.4% past month, Up 0.3% past week
ProShares Short 7-10 Year Treasury (TBX - Free Report) – Up 0.4% past month, Up 0.5% past week
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Yields Rise on Middle East Crisis: Inverse Treasury ETFs to Buy
Key Takeaways
U.S. Treasury yields moved higher across the curve on Tuesday as investors weighed escalating tensions in the Middle East alongside reports that fresh mediation efforts could help curb the ongoing conflict.
The benchmark 10-year Treasury yield rose more than 3 basis points to about 4.63%. The policy-sensitive two-year Treasury yield gained over 4 basis points to around 4.26%, while the 30-year Treasury yield edged up to roughly 5.13%, as quoted on CNBC.
Since bond prices and yields move in opposite directions, the rise in yields reflected cautious investor sentiment.
Ceasefire Hopes Help Limit Market Volatility
According to BMO Capital Markets, the Treasury market has remained relatively stable despite heightened geopolitical tensions.
Reports that mediators have introduced new ceasefire proposals helped cool oil prices, preventing a sharper selloff in government bonds. However, analysts cautioned that market sentiment remains highly sensitive to developments surrounding the Iran conflict.
Energy Prices Could Drive Bond Market Moves
Any decline in Treasury yields could be limited as investors continue to monitor oil markets and the broader geopolitical landscape. Note that if the U.S.-Iran war continues and the key waterway Strait of Hormuz remains under pressure, energy prices will keep rising, which would be enough to stoke global inflation materially.
Amid persistent inflation, global central banks may likely be forced to hike rates. In that case, bond yields will rise, and bond prices will slump.
Global Bond Markets Also Under Pressure
Government bond yields also moved higher in the United Kingdom after newly appointed prime minister Andy Burnham indicated he would adopt a more flexible approach to the country's fiscal rules.
ETFs to Play
Against this backdrop, below we highlight a few inverse treasury-based exchange-traded funds (ETFs).
ProShares UltraShort 20+ Year Treasury (TBT - Free Report) – Up 5.24% past month, Up 1.3% past week
Direxion Daily 20+ Year Treasury Bear 3X ETF (TMV - Free Report) – Up 7.8% past month, Up 2.1% past week
ProShares Short 20+ Year Treasury (TBF - Free Report) – Up 2.4% past month, Up 0.3% past week
ProShares Short 7-10 Year Treasury (TBX - Free Report) – Up 0.4% past month, Up 0.5% past week