iShares 20+ Year Treasury Bond (TLT) ETF: Plot thickens ahead of Fed

The iShares 20+ Year Treasury Bond ETF (TLT) stock price has been in a steep sell-off this year, even as inflows have risen. The stock was trading at $92.92 on Wednesday as investors waited for the upcoming Fed decision. It has dropped by more than 13% from the highest point this year.

The iShares 20+ Year Treasury Bond ETF is a leading fund that tracks an index made up of US Treasury bonds with maturities of over 20 years. It is a big fund with over $39 billion in assets and a 30-day average volume of $23 million. TLT is also a relatively cheap fund with an expense ratio of 0.15%.

The TLT ETF is influenced by the performance of the American economy, inflation, crude oil, and the Federal Reserve. For example, the fund’s stock soared from $58.64 in July 2009 and peaked at $166.92 in March 2022. That time was characterised by historically low interest rates in the United States.

Recently, however, the fund has plunged from its all-time high of $166.92 to $90 as the Federal Reserve has hiked interest rates to the highest level in over 20 years. High interest rates lead to higher yields and low bond prices. The 20-year Treasury Rate stands at 4.62%.

The TLT ETF has dropped in the past few days as investors react to last week’s consumer inflation data. As I wrote in this article, the headline consumer price index (CPI) rose from 3.2% in July to 3.7% in August. Analysts believe that inflation will continue rising as the price of crude oil holds steady. 

Therefore, while the Fed is expected to leave rates unchanged, it will likely point to more increases in the coming months. Economists believe that rates will remain at an elevated level for longer than expected since inflation has turned the corner.

TLT chart by TradingView

Looking at ETF inflows, we see that investors have allocated funds to the TLT ETF this year. Inflows have happened in seven of the past eight months. Only August saw outflows from the fund. In all, investors have added over $15 billion to the fund.

Technically speaking, we see that the iShares 20+ Year Treasury Bond ETF stock has been in a strong bearish trend for a while. Its attempt to recover earlier this year found a major resistance at $107.42. Recently, the stock has remained below the 50-day and 100-day moving averages.

It has also flipped the important support at $97.27 (December 27th low) into a resistance. Therefore, I suspect that the stock will continue falling in the coming days as sellers target the year-to-date low of $88.75. 

Investors should focus closely at $88.75 since the fund could form a bullish double-bottom pattern. A break below that level will see it continue its downward trend in the medium term.

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