US_Treasury_Building-300x199The threat of a broader military conflict with Syria contributed to the 1.6% decline in the S&P 500 yesterday.  The Russell 2000 declined by 2.4%.  Foreign markets also suffered losses yesterday with losses ranging from 1% to 3%.  Oil prices have climbed to $110 per barrel.

When markets are pressured by exogenous, macro factors like new uncertainty in the Middle East, there is often a flight-to-safety.  Safety is U.S. Treasuries. Since the chemical weapons attack in Syria last Wednesday, 10-year Treasury rates have fallen by about 7% from high to low.   The iShares 20+ year Treasury Bond (TLT) is up roughly 4% since August 21.  The further you go out in duration, the more volatility you will see in the Treasury bonds relative to a given amount of change in interest rates.  In 2008 when the S&P 500 declined by 37%, 30-year U.S. Treasuries appreciated by about 60%.  When equities are under pressure and risk is elevated, U.S. Treasuries offer a way to make money during a bearish equity period.

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