Yields surge forces Treasury ETFs lower

Treasury bonds is shown on the conceptual business photo

Andrii Dodonov

In the wake of the Federal Reserve's latest interest rate hike, Treasury yields have taken off on Thursday, placing downward pressure on exchange traded funds that are tied to the moves in the bond market.

On Thursday, Wall Street has watched the U.S. 10-year Treasury yield (US10Y) surged 16 basis points to 3.67%, marking the instruments highest level since February of 2011. At the same time, the U.S. 2-year Treasury yield (US2Y) has soared by 13 basis points to 4.12%. This took the yield to its highest point dating back to October of 2007.

Bond funds across the board have declined as a result, as yields and prices move in opposite directions. Among one of the worst performers is the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), which fell 2.7% on the day.

TLT has been hit harder than others as it focuses on delivering exposure to long-term U.S. Treasury bonds. The long end of the yield curve has not seen as sharp an increase as the shorter end, as traders continue to bet on a potential recession on the horizon.

Yields between the 10Y and 2Y inverted by 52 basis points earlier this morning, marking its deepest inversion seen since June of 2000.

Other Treasury ETFs also in the red: (NYSEARCA:AGG), (NASDAQ:BND), (TLT), (NASDAQ:IEI), (IEF), (SHY), (GOVT), (VGSH), (VGIT), (SCHO), (SCHR), (SPTL), (TLH), and (VGLT).

In related Treasury yield news, the yield curve inversion spread between the U.S. 30-year Treasury yield (US30Y) and the U.S. 5-year Treasury yield (US5Y) trades near its widest point since 2000.

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