"The ETF has declined significantly due to the Federal Reserve's record interest rate hikes, as inflation kept on climbing to decades-high levels. However, inflation has been more or less under control now, and even tariffs have not led to a meaningful increase in inflation. The Fed is now pivoting away from a restrictive monetary policy and is becoming more dovish. Fed Chair Jerome Powell's term will end in May 2026, after which a Trump appointee is expected to lead the Fed. This will presumably lead to even more aggressive cuts to a 3% terminal rate or less by late 2026."
"Interest rates have plateaued and have come down significantly. On the other hand, TLT has stopped declining and has been trading sideways. This ETF gives you exposure to long-duration U.S. government bonds by holding a portfolio that mirrors the ICE U.S. Treasury 20+ Year Bond Index. Once shorter-term Treasury yields start slipping, these long-term bonds will see a lot more demand. Investors get hungry for yield once interest rate cuts narrow down the options for them to keep up with inflation by holding a safe, income-generating asset. Since this ETF has exposure to long-term bonds, it will be one of the only few ways investors will be able to derive a 4%-plus yield if rate cuts continue."
Long-term Treasury yields fell after Federal Reserve rate hikes slowed as inflation came under control. The Fed is shifting toward a more dovish stance with a leadership change expected in May 2026 that could prompt deeper rate cuts to a roughly 3% terminal rate or lower by late 2026. TLT, which mirrors the ICE U.S. Treasury 20+ Year Bond Index, has stopped declining and trades sideways while yielding about 4.42% and paying monthly. Falling short-term yields should boost demand for long-duration Treasuries, positioning TLT to benefit, including in recessionary environments.
Read at 24/7 Wall St.
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