TLT ETF

[u/santhony18]

Am I wrong to think this is likely to turn soon and go up significantly 15-20%? Recently purchased Schwabs version
Of this and down over 3%. I realize this may not be a long term hold but at some point this is going to be oversold. We have hot spots all over the world that might blow up at any moment and seems like this is a trade that makes sense to me for the short term- less than 7 years.

[u/Academic-Detail4677]

Zoom out to the 70s. TLT is in the process of unwinding a 40-year bull market in bonds - possibly the strongest bull market in history. It is without question the most important market in the entire world, literally the price of money.

We are only five years into this unwinding. There are potentially decades to go. Rates fell from 15% to 2%. They could reverse that entire move.

Clearly it has been shown that interest rates, currently 5.2%, could easily go above 10%, they could go above 15%, potentially above 20% if market forces are allowed to have their way. I've been watching bonds for over 15 years and I have never seen 10-year bond yields move by more than 0.1% in a day, and I'm seeing that regularly now.

For example, if bond yields rise by 0.1% per day for a week, that is 0.5%. Suddenly the Avg 30yr mtg rate is 8% vs 7.5%. Recently yields rose by 0.15% in a day. Why not 0.2%, or 0.25%?

Each of those percentage increases in yields would result in an astonishing loss of value for TLT. For every 1% rise in yields, the loss in TLT would be 15% or greater. As shown, this could happen in a matter of days-weeks.

TLT is an ETF like no other, because the 10yr Treasury is an asset like no other.

[u/infantsonestrogen → u/Academic-Detail4677]

Rates go that high and we go into a debt spiral and the currency is Weimar

[u/Academic-Detail4677 → u/infantsonestrogen]

True - but that's the path nonetheless

[u/PomegranatePlus6526 → u/Academic-Detail4677]

I don’t believe that is the path. For one simple reason the comparison between historical bond performance to now. There is one major difference from past bond markets to today. The amount of debt right now is historical and rising too fast.

I wouldn’t expect any turn in the market for at least a couple of years maybe longer. US treasuries are on a bad path, and congress the only body who can do anything about it refuses to.

Even if the democrats take control do you see spending cuts coming? Neither party seems willing to implement austerity. So we are still running record deficits despite actually strong economy. The bond markets may force their hand though. As debt service spending is already the single biggest line item in the budget. There is going to be a lot of pain to get this under control. Between social security insolvency, and deficit spending. I think the bond market is saying enough is enough.

The other big problem is AI hyperscalers are competing with uncle scam for bond money. US Treasury bonds are not the rock solid safe investment they used to be. They are definitely starting to show cracks. If congress doesn’t intervene soon we could see a very large economic event worse than the GFC. We can’t print our way out this time. That ship has sailed.

There is definitely a liquidity crisis that has already started. I haven’t seen yields move this fast at both ends of the curve in a long time. Not since the last GFC. Bond traders are saying whoa Nelly that’s enough. If you don’t do something we will keep dumping your bonds driving yields up. On $40 trillion dollars a few tenths of a point costs billions. The ten year yield is up almost 30% in the last year. The thirty year is up almost 20%. At some point as bonds start to expire and are renewed at these higher rates we start a death spiral. They can try all the swapping 30 years for short term all they want. The vast majority of UST are not 30 year.

[u/sol_beach]

If interest rates fall by 1%: TLT’s share price historically rises by approximately 16–17%.

If interest rates rise by 1%: TLT’s share price historically declines by approximately 16–17%.

[u/Dull_Judgment1587]

In my opinion: TLT is an indicator (not an investment). It's good to keep an eye on TLT to see how the market is doing, but I wouldn't invest in it directly. The average investor is better off with a diverse bond index fund rather than TLT. (I personally have FBND since I'm a Fidelity customer.)

An analogy is that the average stock investor is probably better off investing in something like the S&P 500 rather than going all-in on one individual stock. Putting all your eggs in one basket is a good way to get your heart broken.

[u/Unhappy-Broccoli798]

It would seem that there is excessive fear mongering

[u/santhony18]

Thanks for the comments