TLT ETF Slips As Resurgence In War Risk, Elevated Oil Prices Build Case For Rate Hikes
Synopsis
The long-duration iShares 20+ year bond yield ETF dropped on Wednesday after Fed Minutes hinted towards a possibility of a rate hike, while US-Iran risks resurfaced.
- TLT ETF has seen outflows in five out of six months ending June 2026.
- A few Federal Reserve officials said there was a case for raising interest rates, as per the minutes of the latest monetary policy meeting.
- TLT ETF was down for the sixth straight session.
The iShares 20+ year bond yield ETF slipped about 0.2% on Wednesday, down for the sixth session, as elevated oil prices due to rising conflict in the Middle East sparked inflationary concerns, raising interest rate hike bets.
International Brent crude futures (Co1) settled up 5.43% at $78.19 per barrel. West Texas Intermediate futures (CL1) popped 4.37% to close at $73.52 after President Trump on Wednesday threatened to attack Iran again, saying that “we’re going to hit them hard tonight.”
The United States launched a series of powerful retaliatory airstrikes against military infrastructure in southern Iran on Tuesday, in response to Iran’s bombing of three commercial vessels traveling in the Strait of Hormuz. President Trump said in a post on Truth Social after market close on Wednesday that “it will get much worse” if Iran continues to bomb ships.
The political turmoil has rekindled inflation fears among investors, pushing bond prices lower and prompting bets on a rate hike amid elevated oil prices.
Because bond prices and bond yields move in opposite directions, anything that raises long-term interest rates causes long-duration bond ETFs like the 20-year Treasury ETFs (such as TLT) to fall.
The Fed Minutes Show Case For Higher Rates
According to the minutes of the Federal Open Market Committee’s June 16-17 meeting released on Wednesday, a few Federal Reserve officials noted that a case could be made for increasing interest rates.
The publication highlighted intensifying anxiety among policymakers about inflation, even as apprehensions about the labor market declined slightly.
“Participants generally assessed that information received over the intermeeting period suggested that upside risks to price stability remained elevated while downside risks to achieving maximum employment had moderated a bit,” the minutes said.
According to the CME FedWatch tool, 52% of participants expect the Federal Reserve to raise rates by 25 basis points (bps) at its September 2026 meeting, while 48% expect a hike in October.
TLT ETF: Retail View
Retail sentiment on Stocktwits was ‘bearish’ with ‘high’ message volumes. While the sentiment on Stocktwits for SPY, QQQ, and DIA was between ‘extremely bullish’ and ‘bullish’ zones, with ‘normal’ to ‘high’ message volumes.
TLT ETF has gained 2.3% over the past year.
Other long-duration bond yield ETFs include the Vanguard Long-Term Treasury ETF (VGLT) and SPDR Portfolio Long Term Treasury ETF (SPTL).
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