Dow Jones, Volatility, Treasury ETF Fund Flows Submit-FOMC

Dow Jones, Volatility, Treasury ETF Fund Flows Speaking Factors:

• Dow Jones ETF DIA has seen little exercise because the Dow consolidates close to ATHs.
• Volatility ETF VXX noticed largest one-day influx since summer season 2020.
• 20yr+ Treasury ETF TLT has seen giant outflows because the lengthy finish of the curve strikes up.

Dow Jones, Volatility, Treasury ETF Fund Flows Submit-FOMC

After breaking above the pre-pandemic highs in November and climbing above the 30,000 stage for the primary time, the Dow Jones continued its upward journey in 2021. Volatility-related hiccups in late January and early March had been rapidly brushed to the facet because the Dow climbed larger, hitting the 34,000 stage for the primary time in mid-April. Since then, the Dow has traded largely sideways, remaining between 33,700 and 34,200.

Dow Jones Index – 45 Minute Time Body (January – April 2021)

Chart created by Izaac Brook: Supply: TradingView

The dearth of additional upside within the Dow has translated to quiet on the ETF flows facet. DIA, the main ETF for the Dow Jones Index, noticed its largest influx since January in mid-April alongside the contemporary all-time highs. Since then, strikes within the ETF have constantly been inflows. Nevertheless, the dimensions of those inflows are miniscule in comparison with these seen earlier within the 12 months. The Dow may have an additional catalyst corresponding to progress on an infrastructure invoice or notable constructive developments on the financial reopening entrance to drive one other spherical of ETF shopping for.

Since hitting its highest stage because the monetary disaster in March of 2020, the Volatility Index (VIX) has labored its manner again downwards, with a variety of spikes throughout varied episodes of market concern such because the election and the GME short-squeeze. The VIX dropped under the 20.00 stage in mid-March for the primary time since February 2020 and has largely remained there since.

Regardless of the continued decline within the VIX and a scarcity of latest volatility in monetary markets, the VIX ETF VXX noticed its largest one-day influx because the summer season of 2020 forward of the FOMC assembly. With the VIX so low but appreciable financial uncertainty remaining, it might not be so shocking that traders want to wager on heightened volatility sooner or later. Nevertheless, if merchants had been anticipating the FOMC to unleash a bout of market volatility, they had been actually disenchanted.

The FOMC left coverage unchanged and supplied little to nothing new within the type of up to date steering, prompting little response from the markets. Long run Treasury yields have been on the rise once more this week following their decline from the late March highs. After buying and selling across the 2.25% stage final week, the 30yr Treasury yield moved larger in anticipation of and following the FOMC assembly. Following the assembly, the 30yr yield hit the two.34% mark, its highest level in over two weeks.

The TLT ETF, which tracks a portfolio of 20+ 12 months Treasury bonds, has seen appreciable outflows in latest weeks. The ETF noticed giant withdrawals in February as yields moved sharply larger. Forward of the FOMC assembly, traders started to drag cash from the fund once more.

On April 23rd, TLT noticed its largest one-day outflow because the peak of the Treasury market turmoil within the spring of 2020. Different giant redemptions occurred all through the week, with one of many largest on document occurring the day of the FOMC assembly. With tapering seemingly on the horizon and no changes to the maturity of the Fed’s present purchases, longer-term Treasuries and associated ETFs might even see additional promoting pressures within the close to future, which might see yields tick larger.

— Written by Izaac Brook, DailyFX Analysis Intern