30-Year Treasury Yield Hits 19-Year High, Hammering Bond ETFs

The selloff in long-term Treasury bonds intensified Monday, sending yields to multi-decade highs and pushing the prices of long-duration bond ETFs to some of their lowest levels in years.

The yield on the 30-year Treasury bond climbed to 5.15%, its highest level since 2007. Because bond prices move inversely to yields, ETFs holding long-dated Treasurys fell sharply.

The iShares 20+ Year Treasury Bond ETF (TLT), which holds Treasurys with maturities greater than 20 years, is down 2.7% year-to-date and is trading near its lowest level since 2023.

Meanwhile, the PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ), which holds Treasury STRIPS—zero-coupon securities created by separating a Treasury bond’s interest payments and principal into individual tradable securities—is lower by 5.5% on the year. The ETF is trading at its lowest level since launching in 2009.

Long-duration bonds have borne the brunt of the recent selloff as investors demand higher compensation for holding debt far into the future. Rising commodity prices, particularly oil, have pushed inflation expectations higher, while concerns about mounting U.S. debt levels have added upward pressure on long-term yields.

At the same time, structural forces such as deglobalization and its impact on inflation are contributing to higher bond yields globally. 

The massive investment tied to the AI boom may also be leading to higher bond yields by increasing borrowing needs across the economy.

The move hasn’t been limited to the 30-year bond. The yield on the benchmark 10-year Treasury note rose to 4.63% Monday, its highest level since January. 

The 10-year yield is widely viewed as one of the most important interest rates in the world because of its influence on mortgage rates and broader borrowing costs across the U.S. economy.

The yield on the 10-year topped out around 5% in 2023 and was trading below 4% earlier thsi year. 

The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks Treasurys with maturities between seven and 10 years, is down 1.6% year-to-date.

Shorter-term yields have risen as well, though by less. The two-year Treasury yield climbed to 4.09%, its highest level since February, but remains below its 2023 peak by around 110 basis points. 

Unlike longer-dated yields, the two-year Treasury is more closely tied to expectations for Federal Reserve policy.

Fed funds futures currently suggest investors expect the Fed to keep interest rates unchanged for the rest of this year, though markets are pricing in the possibility of one rate hike next year.