US Treasuries

The fear in Europe and Asia is forcing a lot of money into US Treasuries. This is just the beginning of the sovereign debt crisis, not the end. Think of Greece as Bear Sterns, which blew up many months before Lehman et al.

Stocks are putting in signs of a significant top building – fewer stocks working, fewer countries and sectors working and increasing daily volatility. I don’t think that the current selloff we are experiencing is the final top for US Stocks for the move off last year’s lows. China and most of Europe have probably put in their high for the year. The US will peak last, as it is the safe haven from the Euro.

Here are multi-year charts of several US Treasury ETFs. I am using these, because they have significant volume.

iShares 1-3 Year US Treasury Bond Fund (Symbol - SHY)
It’s a base on top of a base. The current yield is 0.85% (30-day SEC Yield). Nothing spectacular, but if it breaks out of this base, then it gets interesting on a Total Return basis.



iShares 3-7 Year US Treasury Bond Fund (Symbol - IEI)
That’s a big base. A breakout from here and I get excited. The current yield is 2.36% (30-day SEC Yield). It has gone straight up the last five weeks, but I am watching it very closely.



iShares 7-10 Year US Treasury Bond Fund (Symbol - IEF)
This sure looks like a breakout to me. The current yield is 3.38% (30-day SEC Yield).



iShares 20+ Year US Treasury Bond Fund (Symbol - TLT)
This is another possible breakout. The current yield is 4.37% (30-day SEC Yield). Long Term bonds are the most volatile, and TLT looks like it has a lot of room to run if the fear trade accelerates from here.



There is potential here, but they have gone up pretty sharply the last five week. The chart of TLT is the inverse of the charts of risky assets. As they have rallied, institutions have shorted Treasuries to buy risky assets. In my opinion, any significant correction in Stocks and Commodities make Treasuries an attractive place to be. It is simply a matter of when.