The ongoing selloff in long-dated U.S. government debt has hammered BlackRock Inc.'s iShares 20+ Year Treasury Bond ETF, whose shares trade under the ticker TLT, sending its price to a level not seen in over two decades. Concerns around sticky inflation continue to batter fixed-income portfolios.
On Friday the fund fell below its 2004 trough, a lower mark than the one set in the global financial crisis. It has now lost more than half of its value from the 2020 record, a deeper drawdown than any previously seen.
Some traders call the fund a "Widow Maker," and many dip-buyers have tried to pick the bottom of the long-bond selloff. Those buyers have taken heavy losses again and again as yields marched higher and TLT's price dropped.
In 2024, the fund's total assets climbed to more than $60 billion, but they have since fallen to $41 billion because the expected rebound never happened. This ETF has come to symbolize the historic losses that have rocked the long end of the Treasury market.
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The 30-year yield's climb to 5.28% on Friday underscores how far the market has moved from the low-rate period that pushed TLT to its 2020 record. Because the fund holds bonds with maturities of twenty years or more, each jump in yields has translated into a sharper drop in its price.
On Friday, the 30-year Treasury yield climbed to 5.28%, its highest level since 2007. The move deepened a decline that started when the Federal Reserve left interest rates unchanged on Wednesday.
Many market participants now worry that Fed Chair Kevin Warsh cannot tame inflation that has exceeded the central bank's target for five years in a row.
When yields on long-dated Treasuries climb, the prices of existing bonds fall, and funds that hold those bonds fall with them. Because TLT holds bonds with maturities of twenty years or more, its price is especially sensitive to moves in the 30-year yield, which explains why the ETF has lost so much value as rates have pushed higher.
The long end of the Treasury market has been under pressure for years, and the latest Fed decision gave investors little reason to expect relief. Yields have stayed elevated as inflation has repeatedly come in above the central bank's target, while the Fed has kept its policy rate steady. For TLT, each failed turnaround has produced another wave of selling, and the fund's steady decline has made it a cautionary example of what happens when bond investors bet on falling yields too early. Even after this long slide, the fund remains highly sensitive to further moves in long-term rates, meaning another leg up in yields could deepen losses before any eventual recovery takes hold.
The severity of the selloff is visible in TLT's decline from its 2020 high. Each move higher in the 30-year yield has translated into additional mark-to-market losses, and the repeated failure of a rebound has drained billions from the fund's asset base. For investors, the fund's slide shows how long-duration exposure can amplify losses when inflation stays above target and the Fed holds rates steady.
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