The iShares 20+ Year Treasury Bond Fund (NYSEArca: TLT) was down sharply for the second straight day on Thursday as yields climbed on speculation the Federal Reserve will ease back on monetary stimulus later this year.
TLT dropped to its lowest level since April 2012. Bond prices and yields move in opposite directions.
Yields on 10-year Treasury notes climbed above 2.4% at one point Thursday to the highest since August 2011, according to Bloomberg News.
Treasury yields are spiking in the wake of Fed chief Ben Bernanke’s comments that the central bank may taper its $85 billion a month worth of bond purchases if the economy continues to rebound.
“The problem for policy makers is that the whiff of exit, however benign it may be described, leaves few willing buyers to step in as critical price thresholds are breached,” said Eric Green, economist at TD Securities, in a Financial Times report.
“The Fed can control QE purchases, but there are limits to its power,” while rising yields “is a clear example that controlling the exit may prove problematic,” he added.
“I think you’re seeing a lot of people getting out of bonds here in a ‘get me out’ trade,” said Jason Rogan, managing director of Treasuries trading with Guggenheim Partners, in a Reuters article.
TLT is down about 6% the past month.
iShares 20+ Year Treasury Bond Fund
Full disclosure: Tom Lydon’s clients own TLT.