{"id":84664,"date":"2023-11-15T00:51:54","date_gmt":"2023-11-15T05:51:54","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/this-bond-fund-is-beating-big-tech-and-the-rest-of-the-stock-market-heres-why\/"},"modified":"2023-11-15T00:51:55","modified_gmt":"2023-11-15T05:51:55","slug":"this-bond-fund-is-beating-big-tech-and-the-rest-of-the-stock-market-heres-why","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=84664","title":{"rendered":"This Bond Fund Is Beating Big Tech and the Rest of the Stock Market. Here&#8217;s Why."},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-BAR-0000800655\">\n<div data-layout=\"wrap\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          wrap\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--wrap\n    article__inset--lead\n  \"><\/p>\n<p>        <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-wrap\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<\/figure><\/div>\n<p>U.S. inflation cooled in October, which some investors took as a strong signal that the Federal Reserve is done raising interest rates. This optimism fueled demand for long-dated Treasuries, which drove the price of the largest U.S. long-dated bond exchange-traded fund higher.<\/p>\n<p>The $49.2 billion<br \/>\n        iShares 20+ Year Treasury Bond ETF<br \/>\n       (ticker: TLT) closed Tuesday up 2.27% at $89.78. Its shares have gained about 8.5% since its 52-week closing low of $82.77 on Oct. 19, outperforming the Nasdaq\u2019s 6.9% gain and the S&amp;P 500\u2019s 5.1% rise over the same period, according to FactSet data. So far this year, the ETF has attracted net inflows of $20.5 billion, according to BlackRock.<\/p>\n<div class=\"paywall\">\n<p>\u201cWith a large, liquid Treasury ETF like TLT, the only thing that affects the price is interest rates, there\u2019s no credit risk,\u201d said Scott Opsal, director of research and equities for the Leuthold Group, an investment research and asset management firm. \u201cFalling\u00a0interest rates are the reason TLT is moving\u00a0higher.\u201d<\/p>\n<p>The odds the Fed holds interest rates steady through its next two meetings jumped after October\u2019s consumer price index climbed 3.2% year over year in October, a slightly slower pace than the 3.7% rate recorded in September and August.\u00a0<\/p>\n<p>\u201cLong duration funds typically outperform following the end of a hiking cycle and the recent data, such as today\u2019s CPI number, is becoming more and more suggestive that the Fed is actually finished with its hiking cycle,\u201d said Todd Sohn, ETF and technical strategist at Strategas Securities, a macro research provider.\u00a0<\/p>\n<p>Investment strategists said two factors have fueled the fund\u2019s recent share-price gains and inflows. The first is professional traders and hedge funds covering short positions in U.S. Treasury futures.<\/p>\n<p>\u201cThe No. 1 force behind all this is short covering in the Treasury and bond market,\u201d said Opsal. <\/p>\n<p>\u201cInterest rates are falling because of the demand to buy bonds to cover the short future positions,\u201d he added. \u201cIt\u2019s kind of the tail wagging the dog. \u201cAnd driving yields down will make TLT go up. So it is as simple as that.\u201d<\/p>\n<p>Investors who short bonds are betting they will earn profits if the price of the bonds fall. To short long-dated Treasuries, you can buy ETFs such as the<br \/>\n        ProShares Short 20+ Year Treasury ETF<br \/>\n       (TBF) or the<br \/>\n        ProsShares UltraShort 20+ Year Treasury ETF<br \/>\n       (TBT).\u00a0<\/p>\n<p>Shorting bonds is a winning trade if rates rise, as they had until recently, Opsal noted. When rates stop climbing, or start to fall, it can quickly become a losing trade.<\/p>\n<p>Treasury ETFs such as TLT offer investors a simple, low-cost method of adding duration to their bond portfolio, making them a popular tool to act on the changing interest rate outlook.<\/p>\n<p>Jamie Cox, managing partner for Harris Financial Group, said lots of investors have shorted Treasuries through TBT, but that is now changing as recent data suggest the Fed is coming to the end of its rate-hiking cycle. \u201cYou get natural buying in TLT as investors unwind their positions in TBT,\u201d he said. \u201cSo you have the reverse of what has happened over the last 18 months. And it\u2019s just starting.\u201d<\/p>\n<p>The second factor fueling the iShares 20+ Year Treasury Bond ETF\u2019s recent gains is investors looking to lengthen their portfolio duration believing that interest rates have peaked and could head lower from here. Duration is a measure of interest rate risk\u2014long-term Treasuries have a higher duration and are more sensitive to changes in interest rates.<\/p>\n<p>\u201cThere\u2019s a group of investors who have been waiting for the bell to ring who, in their minds, have been saying that once they are sure inflation has been tamed and bond [prices] have stopped going down, they\u2019re going to go long duration,\u201d Opsal said. <\/p>\n<p>\u201cToday\u2019s CPI report is ringing that bell for some people who have been waiting for the day where they think inflation has been licked.\u201d<\/p>\n<p>Retail investors have been able to earn around 5% on short-term investments such as T-bills with no risk, which has been an attractive proposition. \u201cNow the retail investor is saying \u2018I can also earn about 5% on a 10-year or 20-year [government bond], but also have the bonus that if rates come down, I get a little capital gain built in,\u201d added Opsal.<\/p>\n<p>TLT represents the long end of the Treasury market and carries a duration of 16.6 years, which means a 1% fall in rates will cause roughly a 16% rise in bond prices.<\/p>\n<p>\u201cThat\u2019s about 2\u00bd times more rate sensitive than the [Bloomberg U.S. Aggregate Bond] Index,\u201d said Opsal. \u201cSo if you buy TLT with a 16-year duration, you\u2019re making it very clear that you think rates are going to fall and you\u2019re looking to capture that price gain on top of the coupon.\u201d<\/p>\n<p>Write to Lauren Foster at lauren.foster@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/articles\/bond-fund-tlt-dfbb4a6f?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>U.S. inflation cooled in October, which some investors took as a strong signal that the Federal Reserve is done raising interest rates. This optimism fueled demand for long-dated Treasuries, which drove the price of the largest U.S. long-dated bond exchange-traded fund higher. The $49.2 billion iShares 20+ Year Treasury Bond ETF (ticker: TLT) closed Tuesday [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":84665,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-84664","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>This Bond Fund Is Beating Big Tech and the Rest of the Stock Market. 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