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Investing

Bonds Versus Stocks in a Sell-Off, via ETFs

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By Jon C. Ogg Published
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Any time there is a major sell-off in stock, bonds usually are the beneficiary. The problem this time around is that interest rates are already so low that one has to wonder how much the price of longer-dated Treasury bonds can really rally. Now keep in mind that interest rates had become insultingly low in Europe.

The most recent sell-off is coming from a massive tank in Asia, particularly in Shanghai. It is effectively an unavoidable slowdown in China that the market worries will turn into a recession for the world’s largest nation that has been the world’s growth engine.

Here is how the Shanghai reaction looked in ETF terms, beyond ugly.

The 10-year Treasury yield was 1.97%, versus 2.05% on Friday. That was 2.08% on Thursday, 2.13% on Wednesday and 2.20% on Tuesday. The 30-year Treasury yield was 2.68% Monday morning, down from 2.75% on Friday and down from 2.86% last Tuesday. The 30-year was even north of 3% as recently as July 22.

S&P 500 futures were down 85 points and the DJIA futures were down close to 700 points.

iShares 20+ Year Treasury Bond (NYSEMKT: TLT) was indicated to open up 0.75% at $127.35, against a 52-week range of $112.73 to $138.50.

The SPDR S&P 500 ETF (NYSEMKT: SPY) was indicated down 4% to $189.66, versus a 52-week range of $181.92 to $213.78.

The SPDR Dow Jones Industrial Average ETF (NYSEMKT: DIA) was down 4.1% at $157.60, against a 52-week range of $158.27 to $183.35.

The PowerShares QQQ Trust (NASDAQ: QQQ) was indicated down 5.3% at $96.94, against a 52-week range of $90.24 to $114.39.

ALSO READ: Merrill Lynch’s 3 Top Stocks to Buy Into Extreme Market Weakness

Photo of Jon C. Ogg
About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.

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