As speculation of an imminent Federal Reserve rate hike mounts, the largest treasury bond-related exchange traded fund is bleeding assets at its fastest pace ever.
The iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) experienced its worst three-week outflow since it began trading in 2002 as investors yanked $1.5 billion from the fund, with $633 million pulled last week, reports Alexandra Scaggs for Bloomberg. [Rising Inflation Expectations Weigh on Treasury Bond ETFs]
The outflows suggest growing concern that the Fed is readying to raise rates. Investors have already been dumping Treasuries, with the benchmark 10-year Treasuries jumping from the 1.67% low at the start of February and to its current level at about 2.08%.
Despite the large redemptions, TLT has gained almost 1% over the past three weeks as Treasury yields remained relatively flat over the period.
“For a while, the market had been really underestimating the chances of a rate hike,” Matt Whitbread, co-manager for Barings Asset Management, said in the article. “We’ve seen it come around.”
According to futures data, traders are expecting a 52% chance the Fed will hike rates by the end of September, compared to 39% at the end of January. [Alternative Bond ETFs for a Rising Rate Environment]