Investors are increasingly turning to long-term Treasury bonds amid growing concerns over US economic growth and inflationary pressures. The anticipation of lower GDP growth, driven by tariffs that could potentially reduce GDP by 1.2% and increase core PCE by 0.7%, has led to a surge in demand for longer-tenor bond futures. This shift reflects a broader market sentiment that the Federal Reserve may extend its interest rate pause as it evaluates the economic impact of these tariffs.
The renewed interest in long-term bonds, reminiscent of trading strategies from the 1980s, highlights a flight to safety as investors seek stability in the face of potential economic slowdown. The underperformance of 2-year Treasury futures further underscores expectations of sustained inflation and a cautious monetary policy stance. As a result, the iShares 20+ Year Treasury Bond ETF (TLT), which focuses on long-term US Treasury bonds, is gaining attention from investors looking to hedge against economic uncertainties.
As of 00:41 on February 3, TLT is trading at $87.90, slightly above its last close of $87.76. The ETF remains closer to its 52-week low of $84.89, reflecting ongoing market volatility and investor caution amid shifting economic conditions.