The iShares 20+ Year Treasury Bond ETF (TLT) continued retreating this week, falling from the year-to-date high of $100.2 to the current $87.82. It has plunged to its lowest level since May 31st and formed a death cross pattern. So, what next for the blue-chip bond ETF as outflows surge?
iShares 20+ Year Treasury Bond outflows surge
The TLT ETF has plunged hard in the past few weeks as US bond yields have soared after the highly hawkish Federal Reserve decision.
In that meeting, the Fed slashed interest rates by 0.25%, bringing the cumulative cuts to 1%, and hinted that more was coming.
The bank also pointed to two more interest rate hikes in 2025, with analysts at UBS expecting it to restart in June.
This decision was more hawkish since officials had hinted that the bank would deliver four cuts in 2025. It is now more concerned about the policies of the incoming Donald Trump administration.
Trump has made many pledges that will impact the bond market. One is to slash taxes, which will increase the deficit. An independent watchdog predicts a $7.5 trillion surge in the deficit in the next decade.
Trump has also pledged to introduce tariffs on Chinese, Mexican, Canadian, and European goods to lower the deficit. Tariffs are indirect taxes since Americans pay for them in the form of higher prices.
Meanwhile, his plan to deport millions of illegal migrants will also lead to more inflation since these people are the biggest employees in industries like construction and agriculture.
Bond yields have soared, therefore, as investors anticipate more inflation in 2025 and fewer cuts. The ten-year yield rose to 4.57%, the highest since May, while the 30-year rose to 4.765% and the five-year moved to 4.43%.
The TLT ETF has crashed as investors abandoned long-term bonds. ETF.com data shows that the fund is on track to have its biggest monthly outflows in years. It has shed over $5.3 billion in assets this month after losing $1.3 billion last month. These flows bring the year-to-date net inflows to $5.2 billion.
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What is TLT Signaling?
TLT is the iShares 20-Treasury ETF, one of today’s largest and most influential bond ETFs.
I’ve been arguing that the bond market rise in yields as the Fed cutting rates has been a rejection of the easing cycle. The bond market is saying the Fed has…
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The TLT ETF faces major headwinds ahead as US public debt surges to a record high of $36.3 trillion. At some point, especially if Trump succeeds in implementing some of his policies, there is a likelihood that the fund will continue falling as default risks rise.
TLT ETF analysis
The daily chart shows that the TLT ETF stock has been in a strong downtrend in the past few months, as we predicted. The sell-off continued after the Federal Reserve delivered a more hawkish tone than expected.
It has recently dropped below the key support at $88.83, its lowest swing in November this year. The fund has also formed a death cross pattern as the 200-day and 50-day moving averages crossed each other.
It is also nearing the lower side of the descending channel, while the MACD and the Relative Strength Index (RSI) have pointed downwards. Therefore, the fund will likely continue falling, with the next point to watch being at $80, 9% below the current level.
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