October is kicking off with a renewed bond-market rout, pushing up yields and sending a popular fixed-income ETF on Monday to its lowest close since the early days of the 2007-2009 financial crisis.
The iShares 20+ Year Bond ETF
TLT,
widely known by its “TLT” ticker, dropped 2% to $86.93 a share Monday afternoon, on track for its lowest close since Aug. 20, 2007, according to Dow Jones Market Data. The ETF has dropped 12.7% so far this year.
Treasurys had rallied to begin 2023, finding support after a brutal 2022 rout that was described as the worst in investors’ lifetimes, with yields surging as the Federal Reserve aggressively hiked interest rates over the course of the year. Bonds rallied earlier this year as the Fed slowed the pace of rate increases, but have seen renewed pressure, driving yields to new highs, as investors pencil in yields remaining elevated.
Bonds and stocks both stumbled last year, delivering a rare double-whammy to investors who typically look to government debt to cushion the blow in the event of an equity market downturn.
The S&P 500
SPX
remains up 11.7% in the year to date, but suffered consecutive monthly losses in August and September. Gains have been driven largely by an earlier surge for megacap tech stocks. The Dow Jones Industrial Average
DJIA
is up just 0.9% in the year to date.
TLT had dropped last week to its lowest since 2008, but then saw a respite as Treasurys bounced ahead of the weekend as worries mounted over the possibility of a U.S. government shutdown.
But a stopgap funding bill, approved by lawmakers on Saturday, averted a shutdown, leaving investors to return their focus to expectations the Federal Reserve will keep rates elevated for a lengthy period — and may be forced to further tighten policy — in its effort to bring down inflation.
Bond prices and yields move in opposite directions.
The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
jumped more than 10 points to trade above 4.67%, its highest since October 2007.
See: Stock-market investors focus on rising yields as government shutdown averted
Bond ETFs matter because they are a popular way for individual investors to gain exposure in the U.S. fixed-income.
Similarly, the closely followed iShares Core U.S. Aggregate Bond ETF
AGG
was under further selling pressure on Monday, suffering its lowest close since 2008. It tracks the closely followed U.S. Bloomberg Aggregate Bond Index, the main gauge of performance for investment-grade bonds. It also is the index all fixed-income investors strive to beat each year.
—Joy Wiltermuth contributed.
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