By The iShares 20+ Year Treasury Bond ETF (TLT) has recently experienced a significant decline, reaching its lowest level in over 12 years. Currently trading at $89.52 per share, this is below the $90 mark that was broken on Monday.
If the ETF finishes at or below its current level, it will mark the lowest close since March 8, 2011 when it closed at $89.68. Furthermore, if it closes below $89.49, it will be the lowest close since February 18 of that same year.
Dow Jones Market Data reveals that the ETF has fallen nearly 50% from its all-time high of $171.57, which was reached on August 4, 2020. Additionally, FactSet data shows that it has decreased by 5.1% since the beginning of September and 10.4% since the start of the third quarter.
The downward trend of the ETF can be attributed to the increasing Treasury yields in recent weeks. However, it faced a significant setback last week as yields on the 10-year Treasury note and 30-year Treasury bond surged after the Federal Reserve’s press conference led by chairman Jerome Powell. The central bank’s announcement regarding plans to keep interest rates higher for a longer duration than expected caught investors off guard.
The yield on the 10-year note (BX:TMUBMUSD10Y) exceeded 4.50%, reaching its highest level in 16 years. Similarly, the yield on the 30-year bond (BX:TMUBMUSD30Y) hit its highest point in over 12 years, with an increase of 13 basis points on Monday, reaching 4.648%.
Prominent hedge-fund manager Bill Ackman, alongside other investors, has been urging individuals to bet against the 30-year bond. Ackman’s firm even took a substantial position against the bonds in early August, believing that the yield could soon rise to 5.5%. It’s important to note that bond yields have an inverse relationship with prices, meaning they rise when prices fall, and vice versa.
According to FactSet, TLT currently holds more than $38 billion in assets, making it the largest Treasury bond ETF of its kind. Its objective is to track the performance of Treasury bonds with a duration exceeding 20 years, as stated in an iShares fact sheet published in June.
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