| NEW YORK, April 5
NEW YORK, April 5 Bond bears took a beating on
Friday after a weak U.S. payroll report stunned Wall Street and
sparked the biggest rally in U.S. Treasuries in more than 10
Exchange-traded funds that bet on long-dated U.S. government
debt prices to fall suffered their worst one-day loss since late
May, while the 30-year Treasury bond booked its biggest one-day
gain at the same time.
This reversal of fortune came a week after long-dated U.S.
government bonds recorded their worst quarter in a year on the
expectations the U.S. economy was gaining traction and the
speculation that the Federal Reserve might slow or stop buying
bonds to support the economic recovery before the end of year.
ETFs that bet on falling Treasuries prices on the other hand
posted their biggest quarter gain in a year.
Optimism about the economy was put to test on Friday after
the government reported U.S. hirings totaled only 88,000 in
March, less half of the 200,000 forecast by economists.
"It caught a lot of people off-side and they are scrambling
to get back into bonds," Bill Irving, portfolio manager at
Fidelity Investments in Merrimack, New Hampshire, said of
Friday's jobs data.
Among the biggest ETFs for bond bears, the Proshares
Ultrashort 20-plus Year Treasury fund were down 4.04
percent from Thursday, bringing its weekly loss to 8.54 percent.
The $3.2 billion fund rose 3.56 percent in the first quarter and
attracted inflows of $209.2 million in the first quarter and
another $38.4 million in the latest week, according to data from
Thomson Reuters' Lipper unit.
This type of leveraged ETF can pay handsomely because its
gains double the daily price of long-dated U.S. Treasuries as
tracked by a Barclays index. But it is risky because its losses
double the price rise in long-dated Treasuries prices.
Market professionals advise investors against holding such
leveraged ETFs for any length of time because of their extreme
volatility and tendency toward exaggerated losses when the
market moves against the fund's imbedded bet.
The Proshares Ultrapro Short 20-plus Year Treasury ETF
is even riskier because its gains and losses are triple
the daily price moves of long-dated Treasuries.
On Friday, the Ultrapro fund fell 6.24 percent on Friday,
bringing its weekly loss to 12.91 percent. This ETF rose 5.36
percent in the first quarter.
Far smaller than the TBT, the TTT launched in March 2012 and
has just $42.3 million in assets, according to Lipper. It has
seen net inflows each month since launching, including a record
$7.5 million last month, even though $10,000 reinvested in the
fund since inception would have been worth just $7,125 at the
end of February, the most recent data for which compound
reinvestment data is available.
Still, that's more than would be left of $10,000 reinvested
in the TBT since it launched in April 2008: Just $2,386 at of