TLT ETF Outflows Jump As Top Pro Warns On Soaring US Bond Yields

The iShares 20+ Year Treasury Bond ETF stock price crashed to its lowest level since November 2023 as US bond yields surged after the strong consumer and producer inflation numbers. It dropped to $83.66, down by 8% from its highest point this year. 

TLT ETF Outflows Jump As US Bond Yields Jump

ETFs tracking long-term government bonds continued their strong downward momentum last week as concerns about the US economy rose. 

TLT, the biggest of them, suffered $122 million in outflows, bringing the year-to-date losses to $3.92 billion. It had added assets in the previous five weeks.

<figure class="wp-block-image size-large"><figcaption class="wp-element-caption">TLT ETF inflows and outflows | Source: ETF.com</figcaption></figure>

These concerns accelerated after the US published the April inflation report, which showed that consumer and producer inflation surged amid the US-Iran war. 

The headline CPI jumped to 3.8% from the previous month's 3.3%. Similarly, the producer price index jumped to a four-year high of 6.05%. The PPI is often seen as a leading indicator for future inflation since companies often pass price increases to consumers. 

Therefore, these numbers, together with the recent US jobs numbers, mean that the Federal Reserve will maintain a hawkish tone this year. Polymarket, Kalshi, and the CME FedWatch tool estimate that the Fed will not cut rates, even with Kevin Warsh at the helm.?

These concerns, together with the rising US government debt, has pushed the 30-year Treasury yield to 5.128%, while the 10-year rose to 4.60%. The two-year yields crossed the important 4% milestone.?

Analyst Warns About The Bond Market

Wall Street analysts are sounding the alarm over rising yields and their implications for the broader economy and markets. For the economy, higher yields will translate into increased debt repayment obligations and borrowing costs for the US government. For example, the US Treasury last week raised $25 billion in 30-year bonds at a 5% rate ? the highest since 2007.

At the same time, the rising yields mean that companies and consumers will have higher borrowing costs. This, in turn, may lead to lower equity valuations. In a note, Peter Tuz, the president of Chase Investment Counsel, said:

“I do think there is a real fear that inflation is kind of embedded in the economy going forward. You don’t see any signs of it going down right now, and that is a real fear, and it will drive the market down if it continues.”

iShares 20+ Year Treasury Bond ETF Could Be At Risk Of More Downside

Technicals suggest that the TLT stock price may be at risk of more downside, especially if yields continue to rise. It has formed a descending triangle pattern, which is made up of a horizontal support at $83.66 and a descending trendline. 

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TLT stock chart | Source: TradingView

The stock remains below the 50-week and 100-week Exponential Moving Averages. It has also moved below the Supertrend indicator. Therefore, a drop below the lower side of the triangle at $83.6 will point to more downside, potentially to below $80.

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