iShares 7-10 Year Treasury Bond ETF (IEF) Plunges To Fresh 52-Week Low As Rates Rise

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February 1, 2018 6:32am NYSE:IEF

From Zacks: Investors looking at avoiding underperformance should steer clear of the iShares 7-10 Year Treasury Bond ETF (IEF). The fund recently hit a new 52-week low amid rising interest rates.


Shares of IEF are now down roughly 5.1% from its 52-week high of $108.81/share.

But is more pain in store for this ETF? Let’s take a quick look at the fund and the near-term outlook to get a better idea of where it might be headed.

IEF in Focus

IEF focuses on providing exposure to treasurys with 7-10 year maturity, thereby exposing investors to moderate levels of interest rate risk. The fund has an effective duration of 7.50 years and a weighted average maturity of 8.28 years. IEF charges 15 basis points in fee per year and has AUM of $7.7 billion (see all Government Bond ETFs here).

Why the move?

The yield on benchmark 10 year note rose to the highest level since April 2014, as investors grew optimistic about the economy and bet on growing inflation. Moreover, a declining greenback also led to a surge in treasury yields. On Jan 29, 2018, 10-year yield surged to 2.727%. Moreover, the Fed is widely expected to hike interest rates multiple times this year, as Jerome Powell takes over the lead from Janet Yellen. Per the CME Fed Watch tool, there is a 72.1% chance of a 25 basis point rate hike and 3.9% chance of a 50 basis point rate hike in March.

More Losses Ahead?

IEF has a weighted alpha of -2.93. Moreover, the fund has a Zacks ETF Rank #4 (Sell) with a High risk outlook. So, the outlook for this fund remains quite bleak.

The iShares Barclays 7-10 Year Treasury Bond Fund (IEF) was unchanged in premarket trading Thursday. Year-to-date, IEF has declined -2.15%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.

IEF currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #6 of 28 ETFs in the Government Bonds ETFs category.


This article is brought to you courtesy of Zacks Research.


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