The iShares 20+ Year Treasury Bond ETF (TLT) has entered a correction, sliding roughly 10% from its 2024 high as investors flee long-duration government debt. The fund, which tracks long-term US Treasuries, traded near $82.70 on Friday, pressured by rising yields and a surge in outflows.
US public debt is on the verge of crossing the $40 trillion threshold, a milestone that has intensified concerns about fiscal sustainability. The 30-year Treasury yield stands at 5.20%, just below its year-to-date peak of 5.28%, and well above the 4.60% low seen earlier in the year. This upward move in yields has weighed heavily on bond prices, particularly for long-duration instruments like those held by TLT.
Government spending has accelerated under the current administration, with the US-Iran conflict alone consuming over $40 billion. The administration has requested an additional $90 billion in war funding and proposed a defense budget of $1.5 trillion, a sharp increase from the previous $1 trillion. These fiscal pressures have contributed to the rising debt trajectory.
Investor sentiment toward long-term Treasuries has deteriorated. TLT has experienced over $4.4 billion in outflows this year, with recent daily outflows of $282 million, $438 million, and $230 million. In contrast, short-term Treasury ETFs like the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) have attracted more than $4.1 billion in inflows, reflecting a preference for shorter-duration, lower-risk assets.
The bond market's reaction has also been influenced by political developments. The administration's renewed attempts to remove Federal Reserve Governor Lisa Cook, though halted by the Supreme Court, have added to uncertainty. Additionally, concerns about Japan selling its US Treasury holdings have prompted intervention in the yen market, further highlighting the fragility of the long-end.
Technical analysis suggests further downside for TLT. The ETF has been trading in a descending channel, below all major moving averages, indicating persistent bearish momentum. A break below the current support could lead to a test of the $80 psychological level.
For investors, the combination of rising debt, fiscal expansion, and political interference in the Fed creates a challenging environment for long-term bonds. While short-term bills offer a safe haven, the long end remains vulnerable to continued yield increases.
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This article is for informational purposes only and does not constitute financial advice.
