Long-Term Treasury ETF Hits Lowest Level in 16 Years: Bond Carnage

Long-term Treasuries are currently going through one of the worst bear markets in their history, with inflation and interest rates caused by the COVID-19 pandemic leading to over half of their market value being lost. The iShares 20+ Year Treasury Bond ETF, which is often used as an indicator for Treasury performance, is currently at its lowest point since August 2007. The yield on a 30-year Treasury recently rose above 4.80%, inching closer to the critical 5% mark, compared to around 3.7% a year ago and 2% two years ago. This decline became steeper in March 2020 when it yielded just 1%. This increase in yields has resulted in a significant decrease in market value for these long-term assets. Investors now want greater compensation for holding bonds, as they come with stock-like volatility during periods of high inflation and interest rate increases. While the Federal Reserve decided to keep rates unchanged for now, they have not ruled out further rate hikes, suggesting they may keep rates high for longer. The next challenge for the 30-year yield is reaching 5%, followed by the highs in July 2007 at 5.40%. If the 30-year yield continues to increase towards or beyond this level, the iShares 20+ Year Treasury Bond ETF could decrease by 5% from its current price. There are also concerns about AI disrupting the job landscape, as discussed by the Fed’s Vice Chair.