CHART OF THE DAY: US Treasury ETF suffers biggest meltdown on record as rates continue to surge
- Surging interest rates have sparked the biggest meltdown on record for the 20+ year Treasury bond ETF.
- The iShares 20+ Year Treasury Bond ETF has declined 45% from its closing high in 2020.
- Bond losses could get even worse if the Federal Reserve continues to hike interest rates.
Our Chart of the Day helps visualize the massive losses bond market investors have experienced as interest rates continue to soar this month.
The iShare 20+ Year Treasury Bond ETF has declined 45% from its closing high in 2020, and is down a whopping 50% from its intra-day high reached on March 9, 2020. That's the biggest decline the ETF has suffered since its July 2002 inception. The ETF is now trading at its lowest level since February 2011.
The sharp declines have snowballed since the Federal Reserve began hiking interest rates in 2022 in its ongoing bid to tame inflation. And the declines could get even worse if the Fed moves forward with further interest rate hikes, something Fed President Neel Kashkari believe is more likely than not.
Remember, as interest rates rise, bond prices fall, so it's no wonder that one of the sharpest jumps in interest rates in history would have a negative impact on a long-duration bond ETF.
The 10-year US Treasury yield hit 4.56% on Tuesday, which is a far cry from levels under 1% levels in March 2020, when the 20+ Year Treasury Bond ETF was trading at record highs.
Despite the steep three-year drawdown in the ETF, investors are piling money into the fund in a bet that interest rates will likely fall from here. That's based on the ETF's assets under management, which currently stands at about $38 billion.
While the ETF's AUM hit a peak of $44 billion at the end of July, it is still up considerably from March 2020, when it had about $20 billion in assets.
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