Buy the Dip in TLT: A Compelling Case for Long-Term Treasury Exposure

Bite Faang
05-24

The $iShares 20+ Year Treasury Bond ETF(TLT)$  has retreated 4.7% since May 1, 2025, trading at $84.55 as of May 24. This places TLT just 1.5% above its 52-week low of $83.30 , signaling a potential entry point for investors seeking exposure to long-dated U.S. Treasuries. Key metrics:

Dividend Yield: 3.76% (attractive vs. historical averages)

Support Level: $84.39 (May 23 low)

52-Week Range : $83.30 – $101.64

Catalysts for the Dip

Recent volatility stems from:

Fiscal Concerns: Political gridlock over U.S. budget legislation and rising deficit worries (Moody’s downgrade of U.S. credit outlook).

Rate Cut Delays: Fed officials signaling rates may stay elevated until at least September 2025.

Technical Pressure: 10-year Treasury yields breached 4.5% , a psychologically critical level.

Why TLT is Undervalued

Rate Cut Sensitivity: TLT’s duration (~20 years) makes it a prime beneficiary of eventual Fed easing. Futures markets price in two rate cuts in 2025, which could drive bond prices higher.

Institutional Accumulation:

Capital Flows: Net inflows of $66.7M on May 22 suggest institutional buying.

Options Activity: Heavy call volume at $85 strike (29,570 open contracts) implies bullish bets on a near-term rebound.

Yield Advantage: At 3.76%, TLT’s yield outpaces the S&P 500’s dividend yield (~1.5%) and offers a hedge against equity volatility.

Technical & Sentiment Indicators

Oversold Signal: TLT trades near the lower Bollinger Band (20-day), with RSI at 28.

Short Interest: Short volume ratio spiked to 27.8% on May 22 , raising potential for a short-covering rally.

Risks to Monitor

Sticky Inflation: Delayed rate cuts could prolong pressure.

Fiscal Uncertainty: U.S. debt ceiling debates and deficit concerns may weigh on sentiment.

Strategic Takeaway

TLT’s current dip reflects short-term macro fears rather than structural flaws. With a 3.76% yield and asymmetric upside from eventual Fed dovishness, accumulating TLT at these levels offers:

Income: Attractive yield in a low-rate environment.

Capital Appreciation: Potential 10–15% upside if 10-year yields retreat to 4.0%.

Action: Buy TLT below $85 with a 12-month target of $95–$98.

@Tiger Community  @CaptainTiger  @Daily_Discussion  @Tiger_comments  

With Yields at 4.5%, Should You Go Long on US Bonds or Stocks?
Amid the impact of a weekend AAA rating downgrade, the 30-year U.S. Treasury yield briefly exceeded 5%. However, driven by retail buying, Treasury prices eventually closed higher yesterday. The 10-year U.S. Treasury yield is currently around 4.5%, and it's generally regarded as the risk-free rate. Would you choose to go long on U.S. Treasuries or U.S. equities?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • Mortimer Arthur
    05-27
    Mortimer Arthur
    TLT collapsed since Powell started cutting rates last September. Why do people think that future rate cuts will be positive for TLT?
  • Merle Ted
    05-27
    Merle Ted
    the world economy cant afford to have a high interest rate environment. it is that simple!
  • BellaFaraday
    05-26
    BellaFaraday
    I appreciate your insights
  • wavyloo
    05-26
    wavyloo
    Load up
Leave a comment
4