Long-duration Treasury exchange-traded funds are under pressure as the US 30-year bond yield climbs to levels not seen in nearly two decades. The Vanguard Long-Term Treasury ETF (VGLT) and the iShares 20+ Year Treasury Bond ETF (TLT) have both fallen sharply, with TLT trading near $81.35, just above its all-time low of $80.67. VGLT has slipped to around $52, close to its record low of $51.80.
The sell-off in these funds mirrors a broader surge in long-term yields. On Tuesday, the 30-year Treasury yield jumped to 5.32%, its highest level since June 2007. This marks a dramatic rise from the 0.709% low seen in 2010. The increase in yields reflects growing concerns over the US fiscal outlook, as the national debt continues to expand.
Data from the Federal Reserve shows that total US public debt surpassed $39 trillion in the first quarter, with projections suggesting it could cross $40 trillion within weeks. The widening budget deficit, driven by proposed increases in defense spending and other initiatives, is adding to the upward pressure on yields. President Donald Trump has proposed boosting annual defense spending to $1.5 trillion, which would further strain the fiscal picture.
Another factor weighing on the long end is the behavior of foreign holders. Japan, the largest foreign holder of US Treasuries, has reduced its holdings from $1.22 trillion at the start of the year to $1.111 trillion. Continued selling by Japan, partly due to yen weakness, could exacerbate the yield rise.
Despite these headwinds, investors have continued to pour money into long-duration Treasury ETFs. VGLT has seen over $233 million in inflows over the past month, bringing its total assets to $10.3 billion. Year-to-date net inflows for VGLT stand at $806 million. TLT has attracted more than $4.53 billion in the last month, with year-to-date net inflows of $543 million, and now manages over $45 billion in assets.
The relationship between bond prices and yields is inverse, so the surge in yields has been bearish for these ETFs. Technical analysis suggests the downtrend may not be over. On the weekly chart, TLT has broken below the key support level of $81, the lower boundary of a descending triangle pattern. The fund remains below its 50-week moving average, and the Relative Strength Index (RSI) has dipped below the neutral 50 level. If the trend persists, the next major support could be around $50.
Similarly, VGLT has fallen below the $53 support level, the lower side of its descending triangle. The ETF is trading below the Ichimoku cloud, and the RSI continues to decline. A further drop could target $45.
The broader market has also felt the impact of rising yields. As noted in this analysis of Nasdaq futures, higher long-term rates tend to pressure growth and technology stocks. The 30-year yield's climb to 5.3% has also affected AI chip stocks, which are sensitive to discount rate changes. Meanwhile, gold has held above $4,420 despite the yield surge, reflecting its safe-haven appeal.
Investors in long-duration Treasury ETFs should be aware of the ongoing yield dynamics. With the US debt trajectory and potential fiscal stimulus, the pressure on long-term yields may persist, keeping these funds near their lows.
This article is for informational purposes only and does not constitute financial advice.
