TLT ETF at risk despite soaring inflows as bond vigilantes fight back

The iShares 20+ Year Treasury Bond ETF TLT ETF continued its strong downward momentum and was trading at its lowest level since 2024. It has plunged by 54% from its highest point on record as US bond yields have soared and as the US public debt nears the $40 trillion milestone.

US bond yields soaring as public debt nears $40 trillion

There are signs that bond vigilantes are pushing the public debt towards the $40 trillion mark. This debt stands at over $39.065 trillion mark, up by over $3 trillion since President Donald Trump became president last year. If the trend continues, it means that the debt will cross the $40 trillion mark in the coming weeks.

Bond vigilantes have now pushed the US government to pay the highest borrowing costs to sell 30-year bonds since 2001. A $25 billion Treasury auction of 30-year bonds drew yields as high as 5.22%. Before that, the yield was 5.06% at the previous 30-year sale in July.

There are several reasons why bond yields are rising. First, there are concerns that the Japanese government will continue selling US Treasuries to boost the Japanese yen. The country has already sold bonds worth billions of dollars in the past few months, and the recent intervention has backfired. 

US is overspending on key areas

Second, there are signs that the US government is overspending, with Trump’s vanity projects expected to cost billions of dollars. For example, according to the Washington Post, the renovations in the White House are expected to cost over $900 million. Also, he has requested over $87 billion for the war in Iran and is working to boost defense spending to over $1.5 trillion.

Most notably, the Supreme Court put the brakes on Trump’s “reciprocal tariffs”. While Trump has maintained his tariffs, they are less sweeping than those he had before the Supreme Court ruling. These tariffs would have helped the administration to reduce the debt growth.

Further, inflation has remained stubbornly high. A report released this week showed that the headline Consumer Price Index (CPI) slowed to 3.5%, remaining above the Federal Reserve’s target of 2%.

Still, despite these challenges, investors are piling into the TLT ETF. Data shows that the fund has had over $4.3 billion in inflows in the last month. Its net inflows in the last three months stand at $4.28 billion. 

TLT ETF technicals suggest more pain ahead

TLT ETF chart | Source: TradingView

The weekly chart shows that the TLT ETF has formed the risky falling triangle pattern, which normally leads to more downside. It has already dropped below the lower side of this triangle, confirming the bearish thesis.

The fund has remained below the 50-week moving average, a sign that bears remain in control. The current price of $82 is also notable because it was its lowest level in 2023. Therefore, technicals suggest that the fund has more downside in the coming weeks. If this happens, the next key level to watch will be at $80. A move above the key resistance level of $84 will point to more gains.