Treasury Yields Head To 'Danger Zone': Analyst Forecasts Potential Spike To 5%, Disorderly Sell-Off For Markets
Portfolio Pulse from Piero Cingari
Treasury yields on the 10-year note have reached 4.70%, the highest since early November 2023, amid inflation and strong economic data, challenging expectations of Federal Reserve rate cuts. Fed Chair Jerome Powell's recent comments added to market concerns, not supporting a quick return to the Fed's 2% inflation target. This situation has negatively impacted Treasury-related ETFs, with UTEN and TLT experiencing significant declines in April. Vanguard's Ales Koutny warned that yields surpassing 4.75% could lead to a severe market sell-off, potentially pushing rates to or beyond 5%. Despite this, some investors have shown optimism, as indicated by a successful 20-year Treasury auction and a shift towards net long positions in Treasuries for the first time since March.
April 18, 2024 | 4:26 pm
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NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) experienced a sharper decline, falling 5.6% month to date, as investors react to the potential for higher Treasury yields and a changing Fed policy landscape.
TLT's more significant drop compared to UTEN can be attributed to its focus on longer-dated Treasury securities, which are more sensitive to interest rate changes. The current market dynamics and warnings from financial analysts suggest a continued negative outlook for TLT in the short term.
CONFIDENCE 85
IMPORTANCE 85
RELEVANCE 90
NEGATIVE IMPACT
The US Treasury 10 Year Note ETF (UTEN) is down by 2.9% for April, marking its most challenging month since September 2023, amid rising Treasury yields and market volatility.
The direct correlation between rising Treasury yields and the performance of Treasury-related ETFs like UTEN suggests a negative short-term impact on UTEN's price. The ETF's decline reflects investor concerns over inflation and Fed policy adjustments.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90