Trading Volume Soars
The iShares 20+ Year Treasury ETF, known by its ticker symbol TLT, experienced a surge in trading this week as investors grappled with the impact of rising Treasury yields on the market. On Thursday alone, a record-breaking 87.7 million shares of the ETF were exchanged, as reported by Dow Jones Market Data. The high trading volume continued into Friday, hinting that the total shares traded for the week may surpass the previous record set earlier this month, when over 270.9 million shares were traded. It is worth noting that TLT was introduced in 2002.
Heavy Exposure to 30-Year Treasury Bonds
The ETF’s holdings primarily consist of 30-year Treasury bonds. Unfortunately, the value of some of these bonds has plummeted, with their prices now trading below 50 cents on the dollar. Consequently, the price of the ETF itself has declined by 14.8% year-to-date, according to FactSet data.
Divergent Views on Future Yields
While certain market participants anticipate a further increase in yields, many investors have seized the opportunity to buy bonds during this recent sell-off. FactSet data reveals that TLT has experienced approximately $18 billion of inflows so far this year. Moreover, in September alone, over $900 million flowed into the fund, marking the fastest pace of inflows for the year.
In conclusion, the surge in Treasury yields has prompted an unprecedented level of trading in the iShares 20+ Year Treasury ETF, with investors wrestling between bullish and bearish sentiment. The ETF’s heavy exposure to struggling 30-year Treasury bonds is exacerbating its declining price. Despite this, many investors still view this as an opportune moment to enter the market and eagerly invest in bonds.
Yields on 30-year bonds reach highest level in over a decade
The yields on 30-year bonds have surged to their highest levels since July 2007, causing concern among investors. On Friday, however, there was a slight decrease in yields across the Treasury curve. The 30-year yield dropped by 2.7 basis points to 5.079%, while the 10-year note yields fell by 7.7 basis points to 4.908%.
Wall Street’s fixation on the 5% threshold
The 10-year yield came close to reaching the 5% mark on Thursday, which has sparked great interest among investors. There is a growing belief that yields above this level could potentially place additional pressure on corporations and the overall U.S. economy.
Bond market suffers losses
The increase in Treasury yields has resulted in losses throughout the U.S. bond market, impacting ETF investors. Notably, the iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) have experienced significant declines this week.
TLT shows some recovery, but remains down for the week
On Friday, the iShares 20+ Year Treasury Bond ETF (TLT) saw a slight increase in value, rising by 0.7% to $83.35. However, it still recorded a weekly loss of 4.9%. On Thursday, TLT closed at $82.77 per share, its lowest level since July 2007.
Historic bear market for Treasurys
It is worth noting that Treasurys are currently facing a historic bear market, with some experts considering it the worst in history. According to data from Bank of America, Treasury prices are expected to decline for the third consecutive year in 2023, something that has never occurred before.