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Capitalising on a Shift in Federal Reserve Policy

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

iShares 20+ Year Treasury Bond ETF (TLT) is an exchange-traded fund. The Fund seeks to track the investment results of an index composed of United States Treasury bonds with remaining maturities greater than 20 years. These bonds are issued by the U.S. government to fund its long-term borrowing needs. The index also includes fixed-rate bonds, inflation-protected securities (TIPS), and Separate Trading of Registered Interest and Principal Securities (STRIPS).

The fund reflects and has inverse relationship with long-dated U.S. interest rates; therefore, it rises when rates fall and declines when rates increase. The ETF pays a monthly dividend, which was last paid on the 7 th of June 2023 amounting to $0.273. This represents a $3.28 dividend on an annualized basis and a dividend yield of 3.16%. TLT is highly liquid, it has $39.35 billion in assets under management and trades an average of 23.82 million shares daily, charging a 0.15% expense ratio.

As an ETF, TLT allows investors to gain exposure to a diversified portfolio of long-term Treasury bonds by purchasing shares on a stock exchange. The fund seeks to provide investors with returns that correspond to the performance of the underlying index, minus fees and expenses.

While the Fed may potentially implement one or two more rate hikes by year-end, if there is not significant deterioration in economic data, we are nearing the peak of interest rates, and a shift in Federal Reserve policy is coming. Investing in TLT can be advantageous for several reasons:

Price appreciation: When interest rates decline, the value of U.S. Treasury bonds held by TLT, tends to rise.

Income generation: TLT primarily invests in long-term U.S. Treasury bonds, which generally offer higher yields than shorter-term bonds.

Safe-haven investment: U.S. Treasury bonds are considered safe-haven assets, especially during uncertain economic conditions or periods of market volatility.

It’s important to note that investing in TLT, like any investment, involves risks. If interest rates rise instead of falling, the value of TLT and its bond holdings may decline.

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Source: TradingView

TLT had a rough 2022, dropping 40% from a high of $155.12 to a low of $91.85 as the Federal Reserve aggressively increased the short-term fed funds rate last year, and quantitative tightening pushed interest rates higher further out.

It appears TLT have bottomed at $91.85 in October 2022 as the price behaviour over the past seven months shows a number of positive developments. In December 2022 the Relative Strength Index indicator moved into a bull market range which suggests that the prior down trend is likely to reverse course soon.

The sequence of lower lows and lower highs has been broken for the first time since December 2021 showing that the buyers are stepping in. A clear trading range has been established since the onset of the year with the price fluctuating between $98.88 and $109.68. A subsequent break above resistance of $109.68 appears to be highly likely given the improvement in the momentum conditions which will confirm that a new bull market has started. The potential upside price target based on the breakout is in the $120.00 – $125.00 range.

Bond exchange-traded products (ETPs) offer investors diversification, accessibility, transparency, income generation, liquidity, and cost efficiency. These benefits make bond ETPs an attractive option for investors looking to gain exposure to a diversified portfolio of bonds while enjoying the advantages of listed and tradable investment vehicles.

Active traders looking for magnified exposure to iShares 20+ Year Treasury Bond ETF may consider our 5x Long 20+ Year Treasury Bond or -5x Short 20+ Year Treasury Bond ETPs.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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