The iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) has hit its lowest trading level since June 2004, deepening a historic selloff in long-dated U.S. government debt.
The BlackRock Inc. fund touched $81.80 on Friday, falling more than 50% from its March 2020 peak above $170, a staggering decline for one of the world’s biggest fixed-income ETFs.
TLT holds U.S. Treasury bonds maturing in more than 20 years, making its price especially sensitive to movements in the 30-year Treasury yield.
The 30-year yield climbed to 5.28% on Friday, its highest level since 2007, continuing a relentless upward march that has devastated long-bond portfolios.
Thursday’s $25 billion 30-year Treasury auction cleared at 5.216%, the highest auction yield in roughly 25 years, signaling persistent investor demand for higher compensation to hold long-duration debt.
Inflation remains a central driver of the selloff, with July CPI rising 3.4% from a year earlier while producer prices climbed 4.7% over the same period.
The Federal Reserve held its benchmark rate at 3.75% on July 29, though three policymakers preferred an additional quarter-point increase, keeping markets on edge about the future rate path.
Treasury raised its July through September borrowing estimate to $739 billion on August 3, a figure $68 billion above its May projection, adding fresh supply pressure to an already stressed market.
Treasury’s borrowing advisers noted that renewed Iran tensions pushed oil prices higher in July, helping markets shift from expecting rate cuts toward pricing in the possibility of additional hikes.
High demand for capital to fund the artificial intelligence buildout, combined with elevated inflation expectations tied to the war in Iran, have also contributed to the sustained rise in long-term yields.
TLT’s assets have fallen to $41.6 billion from a peak of $64.5 billion, according to ETF.com data, reflecting how investors have reconsidered their exposure to long-duration debt.
“Investors are likely risk averse to owning longer-term Treasury debt right now,” said Jason England, a fixed income strategist at Simplify Asset Management.
The fund has earned a “Widow Maker” label among traders, as repeated attempts to buy the dip on TLT have resulted in heavy losses as yields continued marching higher.
The consequences extend far beyond bond markets, since higher long-term yields raise mortgage, corporate, and government borrowing costs while simultaneously pressuring equity valuations.
