Bond Rally Set to Lash Bears Who Upped Bets Against Treasury ETF

(Bloomberg) -- ETF traders placing a big bet on inflation are braced for pain as fears of a new coronavirus strain break out. 

With money markets offloading wagers on central bank interest-rate hikes, bond bears are on the backfoot and the $15.6 billion iShares 20+ Year Treasury Bond fund, (ticker TLT) is climbing in early trading Friday. 

The ETF’s put-call open interest ratio, which rises as bearish bets multiply relative to bullish ones, was at the highest in more than a year as of Wednesday. 

Should fears over the new Covid variant persist, TLT could well extend its winning streak. It threatens to hurt investors who’ve lavished money on the expectation inflation would sink Treasuries only to be thwarted time and time again. 

The fund was trading 1.6% higher in the pre-market at 7 a.m. in New York. The yield on 10-year Treasuries was down 12 basis points to 1.52%, on course for the biggest drop since late February.

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