The iShares 20+ Year Treasury Bond ETF (TLT), which tracks long-dated U.S. Treasuries, has fallen to its lowest levels since 2004. This decline is largely attributed to a sustained rise in long-term Treasury yields, with the 30-year Treasury yield recently touching 5.38% and the 10-year pushing toward 4.9%. The ETF's effective duration of 15-17 years means that a 1% rise in yields can lead to a 15-17% drop in its price. TLT is down about 7.3% year-to-date and over 10% in the trailing twelve months, eroding the value of its monthly distributions of around $0.31 per share.
Despite these significant losses, TLT has seen substantial inflows, with $6.6 billion in net creations over the past month and $8.1 billion over three months, bringing its total assets under management to $46.6 billion. Some of these inflows are from institutions like pension funds seeking duration exposure at high yields, and some investors are betting on a future decline in interest rates. Bloomberg ETF analyst Eric Balchunas characterized this as "jackpot mode," where a drop in long yields could lead to double-digit gains for the fund.
However, others view TLT as a "cash burner" given its consistent losses. For instance, the fund has lost approximately 35% over the past five years. A potential rebalancing by Norway's Government Pension Fund Global, which might trim $80 billion in U.S. Treasury exposure, adds another layer of concern for the long end of the bond market. While this would be phased in gradually starting in 2027, it highlights the potential for further pressure on long-term Treasuries. Investors also have opportunities for tax-loss harvesting, given the double-digit returns in stocks, by selling bond funds like TLT that are showing losses.
