The last big blast of data before the Fed meets next week could stir up a final debate Thursday about whether there’s a September rate hike in the offing.
John Kosar, chief market strategist at Asbury Research, has been looking at the flow of money in and out of ETFs which show investors are now making a new directional bet on long-term rates. He said prices are declining for TLT, the iShares +20 Year Treasury Bond ETF, but net assets are expanding in TBF, the ProShares Short 20+ Treasury ETF.
“It’s a bearish bet on Treasury prices. That’s an inverse fund. Money is going into it over the last few days, and it’s a bet that long-dated Treasurys are going down. It’s a short-term indicator,” Kosar said
Kosar said that’s not necessarily a bad omen for equities. “In my opinion, if rates are going higher, knee jerk obviously is bad for stocks. But bigger picture, how I look at that is, if I’m a stock market bull I would much rather see (10-year) rates at 2 percent or 1.90. At 1.90, the Fed and the bond market are expecting recovery of some kind,” he said.