The Treasury market is on the brink of a significant shift as yields on long-term bonds approach the psychologically important 5% mark. The 30-year yield is currently at 4.91%, with the 20-year benchmark just shy of this threshold. Bonds maturing between 20 and 26 years have already surpassed the 5% yield, led by the August '48 bond, the highest-yielding nominal Treasury security. This rise in yields reflects market expectations of stronger economic growth or increased inflation, which could prompt a shift from equities to fixed-income investments. The potential for a strong ADP employment report could further catalyze this trend by reinforcing economic resilience, thereby increasing the opportunity cost of holding equities.
The TMF ETF, which seeks to deliver three times the daily performance of the ICE U.S. Treasury 20+ Year Bond Index, is directly impacted by these yield movements. As yields rise, the ETF faces downward pressure due to the inverse relationship between bond prices and yields. Investors are closely watching the upcoming 30-year auction and economic data releases, which could push yields higher and further affect equity valuations.
As of 06:54 on January 8, TMF is trading at $37.61, slightly below its last close of $37.98, and near its 52-week low of $37.78. The ETF's performance underscores the market's anticipation of higher yields and the resulting pressure on equity markets.