These Bond ETFs Are On Fire

Now just over two months into 2016, it is accurate to say the drive to safe-haven assets has been a boon for fixed income exchange-traded funds, primarily those ETFs holding U.S. government debt. Six such funds rank among this year's top 10 asset-gathering ETFs.

And the returns have not been shabby, either. As just one example, the iShares Barclays 7-10 Year Trasry Bnd Fd IEF, which has added nearly $2 billion in new assets, is higher by almost 4 percent on the year, while the S&P 500 is lower by 2.5 percent.

Bond ETFs

Of course, by taking on the risk of leverage, adventurous traders have rewarded in significant fashion with select bond ETFs. For example, two months and a day of ownership of the Direxion Daily 7-10 Yr Trsry Bull 3X Shr TYD means traders that made that bet are up almost 16 percent.

Related Link: Looking For Real Yields On Sovereign Debt? A New ETF Can Help

TYD attempts to deliver triple the daily returns of the NYSE 7-10 Year Treasury Bond Index (AXSVTN). Though it is leveraged, TMF is predictably less volatile than equity-based leveraged ETFs. Over the past 30 days, only one of Direxion's bullish leveraged ETFs has been less volatile than TMF.

Plunging Treasury yields have lured investors to longer-dated gov bond funds. That trend explains the $2.5 billion of inflows to the iShares Barclays 20+ Yr Treas.Bond (ETF) TLT. It also explains why the Direxion Daily 20+ Year Trsry Bll 3x Shr TMF is higher by almost 22 percent year to date.

Although it is a triple-leveraged ETF, TMF is not excessively volatile, either. Only two Direxion leveraged bullish ETFs, including TYD, have been more volatile than TMF.

With the benefit of hindsight, it is clear TMF and TYD have been easy money trades this year, as leveraged plays on a prominent bond theme. However, traders have missed out as TMF has lost $9.62 million in assets and no money has come into or departed TYD.

There are some signs that could be changing. For the five-day period ended March 1, volume in TYD was more than 78 percent above the trailing 20-day average, according to Direxion data.

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