The two worst performing S&P 500 sectors during the third quarter were utilities and real estate investment trusts, as a jump in Treasury yields made those...
The two worst performing S&P 500 sectors during the third quarter were utilities and real estate investment trusts, as a jump in Treasury yields made those high-yielding sectors less attractive despite their usual safe-haven status. The Utilities Select Sector SPDR XLU, -0.29% dropped 10.3% since the end of June and the Real Estate Select Sector SPDR ETF XLRE, +0.06% sank 9.9%, while the S&P 500 SPX, -0.49% shed 3.9%.
Given the ETFs’ high yields and the component companies’ usually steady earnings, they often outperform during times of market volatility and weakness. But with the yield on 10-year Treasurys TMUBMUSD10Y, 4.561% reaching a 16-year high earlier this week, the yields on the ETFs pale in comparison. The REIT ETFs yield in recent trading was 3.90% and the utilities ETF’s yield was 3.61%, which compares with the implied yield for the S&P 500 of 1.62% and the 10-year Treasury yield of 4.567%.
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