Bond markets are experiencing a surge in interest following dovish comments from Federal Reserve Governor Christopher Waller, who indicated the possibility of further rate cuts in the first half of 2025 if inflation data remains favorable. Waller's remarks have led swap markets to price in a 65% chance of a second quarter-point reduction this year, enhancing the appeal of bonds as future interest payments are discounted at lower rates. This shift in monetary policy expectations has contributed to a decline in equity markets, as investors weigh the implications of potential rate cuts on the broader economic outlook.
The iShares 20+ Year Treasury Bond ETF (TLT), which focuses on long-term U.S. Treasury bonds, is currently trading at $86.98 as of 16:11 on January 16, reflecting the increased demand for bonds amid the evolving interest rate landscape. The ETF opened at $86.64 and reached an intraday high of $87.39, underscoring the market's response to the Fed's potential policy adjustments.