In the last few months, the iShares Treasury Bonds (TLT), 20+ Years ETF has retreated as fears about the American economic situation have increased. TLT ETF Fund jumped up to $100 in the last month. This is its highest level since May 2021.
TLT ETF inflows rise
The iShares Treasury Bonds ETF 20+ Years is a large fund which invests in US Government Bonds with a long maturity date.
The amount of money that has been poured in over the last few months is a good sign. ETF.com data shows it added more than $8 billion this year in new inflows, increasing its assets managed to $61 billion.
The trend of inflows may continue, as the economic uncertainty continues to rise.
Recent inflows have been seen into other similar ETFs, such as the iShares Treasury Bond ETF (7-10 Years) (IEF) or the iShares TipS Bond ETF.
Funds are primarily based on economic data that shows that the economy is not performing well. Recent reports showed the softening of the labor market, as the unemployment rate rose to 4,3%, its highest level in two years. The Sahm Rule Index rose to 0.53 as a result of this increase, raising the risk of recession.
In August, over 114,000 new jobs were created. This is the lowest number of job creations since 2021. Despite this, many are concerned with the demise of the Japanese carry trade which has an estimated value of over $500 billion.
Recent events have seen a decrease in recession concerns. Last week the US released encouraging data on retail sales. The initial claims for unemployment have also improved over the last two weeks. This has reduced the risk of a recession.
While recession risks remain, many analysts are now lowering their recession risk. David Solomon, CEO of Goldman Sachs, stated in a recent statement that the US will avoid a “hard landing”. Analysts at his bank have lowered the recession risk.
These factors all have an effect on the bond markets. The yield on the 10-year bond has fallen to 3.87%, while that of the 30-year is now at 4.13%.
The US bond market has had a busy week
Two main factors will make this a significant week for US Bonds. The Federal Reserve is scheduled to publish the minutes from its last meeting this Wednesday. The minutes of the last meeting will give more information about what happened at the most recent meeting, and also provide a preview of the upcoming months.
The Kansas Fed is also hosting the Jackson Hole Symposium, which will be closely watched by many. It is an important gathering where central bankers and economists around the globe meet to discuss key issues.
The speech by the Federal Reserve Chair is the usual highlight of this meeting. This meeting, which is the only scheduled one this month because there are no other meetings planned for this period, will give more insight into what can be expected at the next meeting.
Jerome Powell stated that the Fed’s door was wide open in the meeting of July. The TLT ETF, and similar funds, will react likely to the meeting.
There is one caveat. Jerome Powell would have to surprise the fund managers to make a big move. This is unlikely to happen. The swap market and economists have already priced in a reduction of 25 basis points in September.
Risks for the Fund
Long-term US government bonds are still at risk, given that the public expenditure is likely to rise.
Politicians like Donald Trump or Kamalah Harris, in an ideal world, would be discussing deficit reduction. They should also discuss how to reduce the debt that has now risen to $35 trillion. The two politicians haven’t done a good job of addressing the debt.
Kamala Harris stated in her statement that the government will build over 3,000,000 homes. A government-led program would result in more deficits. This is especially true since Harris did not mention the aspect of pay.
Donald Trump’s plan of continuing to cut taxes would also lead to increased deficits. Since long-term bond are seen to be safe havens there’s a chance that default risk will reduce their appeal.
Stock analysis of TLT ETF
TradingView TLT Chart
I have written articles against the TLT ETF in the past. You can read them here and here . The TLT ETF has underperformed the market as I have stated in my previous articles. You can see them herestrong> /strong> and herestrong>.
TLT’s stock price has been hovering at $100 for the last few months, according to the weekly chart. The stock has moved above both the 100-week and 50-week exponential moving averages (EMA).
It is also lingering around the Fibonacci Retracement of 23.6%. The MACD is above neutral while the Stochastic oscillator has reached overbought.
It has also formed an inverse Head and Shoulders pattern. This is a bullish signal. The fund is likely to continue increasing as buyers aim for the 110 dollar retracement level at 38.2%.
This article ETF of The Week: TLT Waits for Jackson Hole Symposium first appeared on The ICD
This site is for entertainment only. Click here to read more
