Though the U.S. economy has been putting up a strong show in the second quarter of the year and the bourses have hit multi-year highs on several occasions, geopolitical threats related to the possibility of the Greek debt default have once again frozen the solid momentum. Investors too have taken a defensive mode on cue.

Treasury bond ETFs, which saw acute sell-offs to start June on chances of a sooner-than-expected Fed rate hike, have thus regained their sheen on a safe-haven appeal. This defensive mood has stemmed from the futile effort by Greece and its creditor to strike a bailout deal. This means Greece has neared the ill prospect of a debt default and the consequent compulsory way out from the Euro zone (read: Greek Debt Concerns Put GREK in Focus).

Greece is due for a $1.8 billion payment to IMF by the end of this month, per Reuters. The country’s creditors have asked for more austerities from Athens in exchange of a bailout, but Athens is yet to show any sign of compliance. The more the chance of ‘Grexit’ becomes prominent, the higher the demand for safe haven bids are rising (read: Save Haven and Volatility ETFs to Watch Amid Turmoil).

As a result, investors started to position themselves for the imminent volatility in the risky assets and started to park their money in the safer U.S. treasuries, despite Fed rate hike worries. Yields on the U.S. benchmark 10-year notes, which touched the 2.50% mark – the highest point of this year – on June 10, slipped to 2.39% the very next day.

As per the head of overseas investment at South Korea’s Government Employees Pension Service, yields on U.S. benchmark 10-year notes might fall below 2%, if Grexit shapes up. Given these woes, risk-averse investors are treading cautiously, while some are even dumping stocks and junk bonds in favor of treasuries to safeguard their portfolio from steep capital erosion.

Below we have highlighted three Treasury ETFs that hogged investors’ attention lately and added gains despite the looming rate hike concerns.

Vanguard Extended Duration Treasury ETF (EDV)

This fund provides exposure to the long-term Treasury STRIPS market by tracking the Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. The fund holds 72 bonds in total with effective maturity of 25.3 years and average duration of 24.9 years. Expense ratio came in at 0.12% (read: Treasury Bond ETFs Surge on Safe Haven Appeal).

The product has amassed $356 million in its asset base. Its yield was 3.11% annually as of June 12, 2015 and gains came in at 0.34% in the trailing five-day period (read: Best and Worst Bond ETFs Of 2014).

Pimco 7-15 Year U.S. Treasury Index Fund (TENZ)

The fund looks to track the returns of the BofA Merrill Lynch 7-15 Year US Treasury Index. The index is unmanaged and tracks the performance of the direct Sovereign debt of the U.S. Government with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 7 years and less than 15 years.

The fund has amassed over $24 million in assets so far and charges 15 bps in fees. The fund holds 15 bonds in total with effective maturity of 9.20 years and average duration of 8 years. The fund yields 2.20% (as of June 12, 2015). TENZ was up 0.5% in the last five trading sessions.

iShares 10-20 Year Treasury Bond ETF (TLH)

The fund follows the Barclays Capital U.S. 10-20 Year Treasury Bond Index and invests about $411 million in assets in 18 holdings. It has an effective duration of 9.57 years and weighted average maturity of 13.04 years. The expense ratio of the product stands at 0.15%. The fund yields 2.17% (as of June 12, 2015) and was up 0.34% in the five trading sessions.   

Bottom Line

Having said this, we would like to note that the bond market is in highly volatile mood. Especially the U.S. fixed income space is tied between opposite forces, global growth concerns and the looming Fed rate hike.

Though U.S. benchmark yields dived of late, investors should note that any cue on the Fed policy normalization will once again push up interest rates. So, edgy investors need to be hawk-eyed before playing the safe-haven securities in this choppy market.