Long-Term Treasury ETFs Hit Death Cross As Yields Rise, Bonds Tumble

Author: Surbhi Jain | December 04, 2024 12:50pm

It’s been a wild ride for long-term Treasury ETFs lately, and it's looking like they might have hit a rough patch. Following months of declining interest rates, yields on U.S. Treasurys reversed course in October, and the charts are now flashing a warning: the dreaded Death Cross is looming.

For those who aren’t familiar, the Death Cross occurs when the short-term moving average (such as the 50-day) crosses below the long-term moving average (like the 200-day).

And that's exactly what's been happening for a trio of heavy hitters in the bond market: iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), Vanguard Long-Term Treasury ETF (NASDAQ:VGLT), and US Treasury 30 Year Bond ETF (NASDAQ:UTHY).

The recent surge in long-end yields, after months of decline, has turned this segment of the market into a hotbed of concern. The 10-year U.S. Treasury note yield, which fell to a low of 3.63% in September, jumped more than 0.80% as the Federal Reserve cut the federal funds target rate in September and November.

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The result? A sharp inverse reaction in Treasury bond prices, and unfortunately, for these ETFs, that's a price decline.

Let's break it down:

• iShares 20+ Year Treasury Bond ETF: Once a star of the bond world, this ETF now has its 50-day simple moving average below its 200-day. And while it’s seeing a bit of buying pressure, the bearish signals on the chart indicate a downward trend that could be setting up. With a stock price at $93.06 and RSI at 54.23, things aren’t looking rosy for this long-duration bond fund.

Chart created using Benzinga Pro

• Vanguard Long-Term Treasury ETF: This ETF is in the same boat, with its 50-day moving average below the 200-day. It has a similar chart pattern to iShares 20+ Year Treasury Bond ETF and shows potential for future bearish movement as the market contemplates further interest rate hikes. At $58.48 and an RSI of 54, it's hard to argue against the bearish signals forming.

Chart created using Benzinga Pro

• U.S. Treasury 30 Year Bond ETF: Last but not least, this ETF is also struggling to hold onto its gains. Its price at $44.35 isn't enough to offset the pressure from the moving averages. Although the short-term outlook has some bullish signs, the 50-day SMA crossing below the 200-day indicates a tough road ahead.

Chart created using Benzinga Pro

With a surge in long-term Treasury yields, it's clear that the long bond party might be winding down. Investors betting on these ETFs are facing an uphill battle, and a higher interest rate environment seems to be taking its toll.

For those holding these three ETFs, it might be time to re-evaluate your exposure to these long-duration bonds before the Death Cross turns into a market-wide plunge.

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• Microsoft’s Death Cross: Tech Giant Faces A Double Blow With FTC Pressure

Photo: Shutterstock

Posted In: TLT UTHY VGLT