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Treasury Yields Rise on Waning Rate-Cut Bets Amid Sticky Inflation

Explore how unexpected inflation data has led to declines in long-term Treasury ETFs, including TLT and VGLT.

ETF Central
By ETF Central Team · April 29, 2024
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Treasury Yields Rise

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The U.S. 10-year Treasury yield's upward trajectory for the fifth consecutive week signifies more than just numbers. With a gain of 78 basis points to 4.66% from 3.88% since the start of the year, and +4bps over the week, the yield of this vital economic benchmark shows that market sentiment on inflation and future monetary policy expectations has gradually deteriorated.

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Inflation and Interest Rate Expectations

Recent data showing a surprise uptick in the core Personal Consumption Expenditures (PCE) for Q1 to an annualized 3.7%, against a 3.4% forecast, has stirred the pot. This higher-than-anticipated inflation reading has caused traders to recalibrate their expectations, pushing the timeline for a potential rate cut to December, a marked departure from earlier anticipations of three rate cuts this year.

The ETF Perspective

This shift in interest rate outlook and the persistent rise in Treasury yields have had noticeable repercussions on long-term Treasury ETFs. Overall, this asset class suffered a setback, witnessing a 0.94% drop over the week. Vanguard Extended Duration Treasury ETF (

) and the Vanguard Long-Term Government Bond ETF (
VGLT
) were particularly affected by these developments, with respective declines of 1.55% and 0.84%, bringing their year-to-date performance towards a two-digit loss.

Group Data

Index Data

Funds Specific Data:
TLT
,
VGLT
,
SPTL
,
EDV

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.

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