Long-term Treasury bond ETFs jumped nearly 2% Thursday as the 10-year Treasury yield fell below 5%, with investors seeking the safety of government bonds as technology stocks sold off despite elevated producer inflation
Long-Term Treasury ETFs Rally
The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) closed Thursday at $81.74, up 1.87%, while the Vanguard Long-Term Treasury Index Fund ETF Shares (NASDAQ:VGLT) gained 1.77% to $52.39, according to the market data.
At the latest check Friday, the 10-year Treasury yield stood at 4.98%, while the 30-year yield was 5.30%. The five-year yield was 4.80%, according to the supplied Treasury yield data.
The retreat in yields follows a sharp rise earlier this fall. The Kobeissi Letter said Thursday that the 10-year yield had fallen to 5% "for the first time since Sept. 23 as the selloff in technology stocks deepens."
Kobeissi also said it turned bullish on TLT on Oct. 2, when the 10-year Treasury yield reached 5.30%, and that the ETF was approaching its $82 target Thursday.
Investors Rotate Toward Treasuries
Martin Pelletier, investment manager at TriVest Wealth, said investors had been shifting toward U.S. Treasuries while reducing exposure to gold.
"In the past month investors rotating into UST and selling gold $GLD," Pelletier wrote Thursday.
Hot PPI Keeps Inflation Pressure In Focus
The Treasury rally comes even as producer inflation remains elevated. The U.S. Bureau of Labor Statistics said the Producer Price Index for final demand rose 1.3% in September and 6.3% from a year earlier, the largest 12-month increase since December 2022.
Higher-than-expected producer inflation can put upward pressure on Treasury yields by reinforcing expectations that the Federal Reserve may keep interest rates higher for longer.
The Federal Reserve raised its target range by 25 basis points in September to 3.75% to 4%, saying at the time that "inflation remains elevated." The Fed’s next policy meeting is scheduled for Oct. 27-28.
How Have Short- and Long-Dated Bond ETFs Performed?
| ETFs | 1-Month | 6-Months | YTD | 1-Year | 5-Years |
| TLT | -0.01% | -5.76% | -6.97% | -11.21% | -43.49% |
| VGLT | -0.04% | -5.5% | -6.11% | -10.26% | -40.04% |
| Vanguard Short-Term Bond Index Fund ETF (NYSE:BSV) | 0.14% | -2.01% | -2.56% | -2.96% | -5.61% |
| iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY) | 0.25% | -1.21% | -1.61% | -1.92% | -5.02% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock