shy /SHī/ – adjective 1. being reserved or having or showing nervousness or timidity in the company of other people.

When one thinks about short-term US Treasuries and their traditional day-to-day price action, shy is a pretty good description. Traditionally, short-term Treasuries have not been the place an investor who was looking for action would go to look. That’s what tech stocks are for! As the Fed has embarked on what has been the most rapid pace of rate hikes in at least 40 years, though, no type of financial asset, including short-term Treasuries, has been spared. The chart below shows the iShares 1-3 Year Treasury Bond ETF (with the aptly named ticker SHY) over the last year. A year ago, the ETF was trading just above $84, and last week it was down near $80 before rebounding over the past few days to a high of $82.02 yesterday. A one-year range of just under 5% is hardly volatile, but from the perspective of a short-term Treasury investor, it’s a gigantic move.

The last week has been a period of historic volatility for US Treasuries – at least relative to the last 20 years. The chart below shows the daily percentage changes in SHY since its inception in July 2002. Yesterday, the ETF had its largest-ever one-day gain at just under 1% (0.997%). You can also see from the chart that ever since the FOMC started hiking rates in early 2022, the magnitude of SHY’s average daily moves has rapidly expanded.

Monday’s (3/13) nearly 1% rally in SHY also marked a milestone for the ETF in that it experienced a one-day gain or loss of at least 0.25% for three consecutive trading days. That tied the longest-ever streak of 0.25% daily moves from back in September 2008 just after Lehman declared bankruptcy. With SHY down 0.34% on the day in late trading Tuesday, it is now on pace for its 4th straight day of 0.25% daily moves. Yup, you read that correctly; volatility in short-term Treasuries is greater now than it was during the Financial crisis! When Powell said last Summer that fighting inflation would ‘bring some pain’, he wasn’t kidding. As a result, SHY may want to consider changing its ticker to something more applicable.“BOLD” is available.  

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