VGLT, TLT ETFs eye record lows despite inflows as US 30-year Treasury yield jumps

The Vanguard Long-Term Treasury ETF (VGLT) and the iShares 20+ Year Bond ETF (TLT) continued their strong downward trend. TLT dropped to $81.35 and is nearing its all-time low of $80.67. It has dropped by over 55% from its highest point this year. Similarly, the VGLT ETF fell to $52, a few points above its record low of $51.8.

VGLT and TLT are falling as US 30-year yields jump

There are concerns about the rising US bond yields as the country’s public debt soar. Data shows that the 30-year Treasury yield jumped to 5.32% on Tuesday, its highest level since June 2007, and much higher than the 2010 low of 0.709. 

This simply means that the cost the US is paying to its bondholders has continued rising, a trend that may continue now that the US public debt is soaring. Data compiled by the Federal Reserve shows that the debt jumped to over $39 trillion in the first quarter, and the estimate is that it will cross the $40 trillion mark in the next few weeks.

Worse, there are signs that this crisis will continue in the foreseeable future as the US budget deficit continues to widen, especially if President Donald Trump has his way. For example, he has proposed boosting the annual defense spending plan to $1.5 trillion. Some of these funds will go towards his vanity projects, including the new Trump Class ships. 

Worse, there are signs that Japan, the biggest holder of US debt, has continued to pare back its holdings. It now holds $1.111 trillion in debt, down sharply from $1.22 trillion where it started the year. This selling may continue as the Japanese yen continues weakening. 

Despite the ongoing risks, investors have continued to pile their funds into the TLT and VGLT ETFs. Data shows that the VGLT ETF has had over $233 million in inflows in the last month, bringing its total assets to $10.3 billion. In total, its net inflows this year was $806 million.

The TLT ETF has also had over $4.53 billion inflows in the last month, with the net inflows year-to-date being $543 million. It now has over $45 billion in assets. 

Soaring long-term bond yields are usually bearish for the TLT and VGLT ETFs because prices move inversely to yields.

TLT ETF technical analysis

TLT chart | Source: TradingView

The weekly chart shows that the TLT ETF has been in a strong sell-off in the past few months. It has just crossed the important support level of $81, the lower side of the descending triangle pattern. Also, the fund has remained below the 50-week moving average, while the Relative Strength Index (RSI) has dropped below the neutral level of 50.

Therefore, the fund will likely continue falling as bond yields continue rising. If this happens, the next key level to watch will being at $50.

VGLT ETF technical analysis

VGLT ETF chart | Source: TradingView

The weekly chart shows that the VGLT ETF has been in a strong downward trend and is now hovering at its all-time low. It has already dropped below the important support level of $53, the lower side of the descending triangle pattern. 

VGLT remains below the Ichimoku cloud, while the RSI indicator continued falling. As such, the price will continue falling, potentially to $45.