I believe $TLT is a great investment for the next 3-5+ years. With the current macroeconomic environment, there is a lot of potential here for capital gains. This claim is based on the recent lowering of interest rates.
I have ALWAYS been bullish on the U.S stock market. Despite that, I have a feeling there will soon be a lot of market turmoil. There is a lot on the table right now regarding the economy and management of foreign policy. Much will need to be decided after the upcoming election.
The data I have gathered from FRED will be charted from 2004 to 2024. The previous years numbers are averaged on a monthly basis to total an annual figure for that year.
Federal Funds Effective Rate Over 20 Years (FRED)
As you can see, each time the FFR has been raised within the span of a few years, once rate cuts start, the market plumets. On June 30th, 2004, the FFR was raised from 1.0% to 1.25%. Following this, there was 16 more rate hikes between 2004-2006 resulting in a final rate of 5.25%. On September 18th, 2007, rate cuts started. The initial was -50 bps. Sound familiar? After 9 more sequential rate cuts between 2007-2009, the FFR was .16% for the beginning of 2009.
From the timeframe of rate increases and decreases in 2004-2009, the market was a catastrophe. The same can be seen in the years 2015-2021. On December 17th, 2015, rate hikes started from .25% to 2.16% ending December 20th, 2018. The following year starting in August, rates were once again steadily cut until March 16th, 2021, with an ending rate of nearly zero. From 2021-2024 we have seen rates rise to 5.33% and just yesterday were cut 50 bps.
TLT 52-week Low/High price during the years mentioned:
2004 – $83.10 – $89.55
2005 – $89.33 – $96.70
2006 – $84.16 – $91.53
2007 – $85.17 – $94.99
2008 – $90.28 – $119.35
2009 – $89.89 – $105.71
This data represents a 27.20% gain over 5 years. Now for 2015-2020.
2015 – $117.46 – $130.69
2016 – $119.13 – $141.56
2017 – $120.17 – $127.99
2018 – $113.58 – $121.97
2019 – $120.02 – $147.28
2020 – $152 – $171
This data represents a 45.58% gain over 5 years. Now lastly, for 2021-2024.
2021 – $135.45 – $151.59
2022 – $96.11 – $139.87
2023 – $83.58 – $106.46
2024 – $88.82 – $99.01
We can see a 36.80% loss over 5 years.
For these specific periods, the data concludes a lot of price volatility for TLT seeing swings of +27.20%, +45.58% and -36.80%. Price is highest during rate cut years.
Based on this historical data, there seems to be a pattern within 5 years of rate hikes followed by cuts. Rates raise in the first 2-3 years a substantial amount followed by a substantial decrease in rates the following 2-3 years. The FED has announced the prospect of future cuts in the next 2 years with a target rate of 2.9%. This seems like it is following the trend.
Market Yield on U.S. Treasury Securities at 20-Year Constant Maturity (FRED)
The market yield chart above displays that anything 4.5% and under correlates with an attractive price for TLT compared to what it currently trades at.
iShares 20+ Year Treasury Bond ETF (TLT) Yearly 52-Week High (FRED)
It goes without saying that when rates lower, bond prices raise. I have picked this ETF due to the price sensitivity long term bonds experience from rate fluctuations. The fund also has a yield of 3.72% but I am not concerned with that.
To sum up, TLT currently sits at $98.89. If rates can get to the target 2.9%, I expect further upside of a minimum +15.28% resulting in a price of $114. As I mentioned, I believe a lot will unfold in a matter of time and therefore, see the bond market as an excellent play.
NOT INVESTMENT ADVICE. I actually saw some DD on here that contradicts my conclusion. Do what you will. Would love to hear some other opinions.
Why I believe bond ETF $TLT is a great Invesment.
byu/One-Hovercraft-1935 inwallstreetbets
Posted by One-Hovercraft-1935
21 Comments
so now i got to buy puts you know this
It’s definitely a good investment/hedge with the coming rate drops. More of a r/stocks post than this sub. People here mostly care about yolos and ss, you know, gambling stuff not sound investment advise.
This isn’t degenerate enough to be WSB worthy, but I agree and have about $80k in TLT.
We are in a whole new world sir. SPY2K by 2028 election.
Would LEAPS be a good play on this?
This is pass for me, what I want is investments that justify my drinking problem, trades that keep me up at night.
Owned TBT when I thought interest rates were going up 4 years ago. I was right, but TBT did nothing.
Think the 20-year horizon is the issue. Anything closer in if you’re guessing lower rates?
A true degen knows a ticker only needs to move a few bucks with enough options leverage to make a fortune.
TLT basically cannot go down too far and has a very high likelihood of going up in the next year or two due to the rate cuts cycle we’re in. The problem is just being too degen and timing it too close.
If y’all are the degens I know please don’t use short dated options. Either use LEAPS calls or LEAP call spreads.
For example:
– buy the 90C and sell the 110C for Jan 2026. Might cost about $10 or so
– at Jan 2026 if it reaches $110 that $10 you put in becomes $20, so effectively doubles
– adjust for higher risk or lower risk as needed by moving the dates or strikes in or out
I believe I can fly
I was full TLT but remember that it doesn’t protect against currency devastation
I’ve been accumulating TMF (triple leveraged 20yr treasury). I’m also thinking of buying TLT too.
Bro shut up. You just called the tippy of the top. Guaranteed it goes down this week because intelligent investors will be liquidating their positions and buying risk-on assets. Durp.
lol, you missed half the move
How do you think about sovereign debt issues in relation to TLT
You’re a year or two late, bud. You missed it.
Posting for later
Coin flip –
If we start reinflating, rates will climb continually and TLT is a terrible choice.
If we deflate without crushing the economy, steady gains for 3-5.
If we deflate BY crushing the economy, 50% gains in a few months then back to shitty returns.
Um they just cut short term rates by .5% and long term rates *rose*, does not bode well for your thesis.
Definitely a good investment. I would also keep an eye on gold and commodities going forward. In case of a crash, gold will drop temporarily. Commodities will go lower over the next 2 years.
If the markets go to shit and a recession does happen, then TLT and TMF should
Print. This means the fed might have to go back to QE, which would lead to hyperinflation and that combined with low unemployment could lead to stagflation which is bad for long bonds.
This is wsb, you gotta swap it for TMF at least.