The bond market meltdown has caused the biggest bond ETF to hit a new low since July 2007. The iShares 20+ Year Treasury Bond ETF (TLT) has plummeted by over 50% since its closing high in 2020.
On Thursday, the biggest bond ETF, TLT, continued to decline amidst an ongoing Treasury sell-off. Tracking an index of Treasurys with maturities of 20 years and more, TLT reached its lowest level since July 2007, currently down 1.4% for the day and 15.5% for the year.
This marks a significant decline for the TLT ETF, as it has lost over 50% since its closing high last year, which is the largest drop since its inception in 2002.
Unlike the traditional bond market, bond ETFs are traded on an exchange like stocks. They track the value of a portfolio of bonds, rather than its yields.
Treasury bonds are currently experiencing a historic collapse, exacerbated by recent rate hikes by the Federal Reserve and concerns over federal deficits. The yields on 10-year Treasury bonds have risen close to 5%, a significant increase from 3.3% earlier this year.
The spike in Treasury yields on Thursday was prompted by Federal Reserve Chair Jerome Powell’s statement that the central bank could implement rate hikes if labor market tightness persists.
Other bond ETFs, such as the iShares 1-3 Year and iShares 7-10 Year Treasury Bond ETFs, have also experienced lower trading due to the bond market meltdown.
Bond ETFs gained popularity in 2020 during the pandemic-induced volatility, as investors sought refuge in safe assets. Similar to other ETFs, a bond ETF provides exposure to a diversified portfolio of bonds, allowing investors to diversify their holdings.
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