Weekly Commentary: Safe Haven Treasuries Not So Safe

by Doug Noland
Credit Bubble Bulletin

A “sloppy” auction saw 30-year Treasury yields surge 21 bps this week to 1.45%, an almost seven-week closing high. Ten-year Treasury yields jumped 14 bps to 0.71%, while benchmark MBS yields rose 17 bps to 1.38%. But how about in dollars? The iShares 20+ Year Treasury Bond ETF (TLT) lost 3.9% for the week. Is a so-called “safe haven” losing almost 4% in a single week really a safe haven? Sure, Treasury yields could decline more from current historically low levels. But this week confirmed the risk versus reward calculus for owning Treasury bonds these days is unattractive.

Corporate bonds somewhat outperformed but posted losses for the week nonetheless. The iShares Investment Grade Corporate Bond ETF (LQD) fell 2.4%, and the iShares High Yield Corporate Bond ETF (HYG) declined 1.3%. We’ll see if this week’s reversal leads to any slowdown in the wall of “money” flooding into bond funds.

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