After a steady rise through the summer, bonds have given up ground to stocks as investors react to US plans for quantitative easing.
Since August 16, the Barclays Capital 20+ Year Treasury Bond Fund (TLT) has declined 10% with stocks rising 11% over the same time period.
The Federal Reserve’s plan to introduce $600 billion into the economy has kept short term rates low. However, fears of a weaker dollar and higher commodity prices are pushing long term rates higher causing the drop in value of long term bonds.
The $2.8 billion TLT exchange traded fund holds 14 US Treasury Bonds with maturities ranging from 2031 to 2040. The expense ratio is 0.15% and the ETF has a 30-Day SEC Yield of 4.15%.
Treasuries got a lift today while stocks took a hit on a renewed EU debt crisis, this time in Ireland.