SUPERNEWS

Macro

TLT ETF Dives 9.17% YTD Amid Inflation, Bearish Signals

Unexpected high inflation triggers a 9.17% YTD loss for iShares 20+ Year Treasury Bond ETF, challenging Fed rate-cut expectations.

By Barry Stearns

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4/15, 02:03 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
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Key Takeaway

  • iShares 20+ Year Treasury Bond ETF plunges due to unexpected high inflation, with a year-to-date decline of 9.17%.
  • Technical indicators reveal a strong bearish trend, including a MACD at -0.94 and RSI at 36, signaling oversold conditions.
  • Despite recent sell-offs and inflation concerns, the future of long-duration bonds remains uncertain amidst evolving economic data.

Inflation Fears Trigger TLT Sell-Off

The iShares 20+ Year Treasury Bond ETF (TLT), a beacon for bond investors in 2023, has faced a sharp downturn in 2024, primarily due to unexpected high inflation data. March's Consumer Price Index (CPI) figures exceeded forecasts, leading to a 1.3% drop in TLT, exacerbating its year-to-date loss to 9.17%. This decline starkly contrasts its previous year's performance, where it attracted $24.8 billion in inflows, the highest among fixed-income ETFs. Investors' initial optimism for a favorable rate environment has been dampened by consecutive robust inflation reports from January through March, challenging the Federal Reserve's rate-cut expectations.

Technical Indicators Highlight Bearish Sentiment

The technical analysis of TLT paints a bearish picture, with its share price falling below key moving averages such as the 5-day, 20-day, and 50-day SMAs. The Moving Average Convergence Divergence (MACD) indicator signals bearishness at -0.94, and the Relative Strength Index (RSI) suggests oversold conditions at 36. Bollinger Bands analysis further supports the bearish outlook, with TLT trading in the lower band, indicating near-term selling pressure. These indicators collectively underscore the prevailing negative sentiment towards long-duration bonds amidst the current inflationary and interest rate environment.

Mixed Producer Inflation Data and Market Reactions

March's Producer Price Index (PPI) showed mixed signals, with a year-on-year increase of 2.1%, the highest in nearly a year, yet the month-on-month increase was less than expected. This mixed PPI data, coupled with the surprising consumer inflation figures, has kept the risks of "high-for-longer" interest rates alive. Following these reports, Treasury yields fell, with the two-year yield dropping 4 basis points to 4.94%. The market's reaction reflects growing uncertainties and adjustments in expectations for the Federal Reserve's interest rate decisions.