bonds Markets

In Stark Reversal, Popular Treasury ETF Hemorrhaged Record $1.2 Billion During Bond Rout

At the risk of beating a dead horse...

Late last week, while documenting the bloodbath in bonds that pushed 10-year yields in the US higher by more than 20bps amid ostensible progress on trade and (possibly misplaced) optimism that the worst is over for the global economy, we noted that TLT suffered one of its worst weeks since the election.

Specifically, the vehicle plunged more than 4% over the five-day stretch, a painful loss, albeit one retail bond longs can certainly afford given what kind of year it’s been.

TLT is still up more than 11% in 2019, thanks to the inexorable slide in yields that played out almost uninterrupted from January through August as growth concerns, falling inflation expectations and the epochal, coordinated central bank pivot emboldened bond bulls and exacerbated the duration infatuation.

Opinions vary on whether and to what extent last week’s bond rout is sustainable and/or desirable. Generally speaking, there seems to be some agreement around the notion that higher yields aren’t the worst thing in the world for risk assets as long as any further selloff in bonds is explainable by way of a rosier outlook on growth and/or the consummation of the trade deal.

In any event, if you’re wondering how badly TLT hemorrhaged last week, the answer is $1.2 billion worth of badly.

Simply put, it was the worst week of outflows ever for the vehicle.

At the risk of beating a dead horse, that marks a stark reversal of fortunes. In August, when the bond rally went into hyperdrive, TLT staged a truly impressive 8.5% rally over nine sessions.

It was the longest daily winning streak in more than a dozen years.


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