Record haul for $54B long-duration ETF amid rate cut bets

The biggest long-duration bond ETF raked in record cash this week as a cohort of investors recalibrate bets on when the Federal Reserve will cut interest rates this year.

BlackRock Inc.’s $54 billion iShares 20+ Year Treasury Bond ETF (ticker TLT) attracted a $2.7 billion inflow on Monday, its biggest one-day haul since its 2002 inception. That brings its tally to roughly $4.4 billion for the year so far, despite racking up a nearly 3% loss. 

It comes as investors begin to reshuffle their portfolios at the mid-year mark, while traders earlier this week embraced bets on 3 percentage points of cuts over the next nine months as economic growth cools.

“It looks like investors are starting to fight the Fed again,” said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “They’re betting on a Fed cut — you’d get a wicked price move if you’re right,” he said, adding that mid-year portfolio rebalancing also could have played a role. 

Longer-dated bonds may gain as investors prepare for the central bank to cut interest rates, with many looking to havens should the economy slow down. An index tracking Treasuries on a total-return basis has gained about 1.7% so far in June, on track for its best monthly performance in 2024, and all but erased its losses for the year.

Fed officials recently forecast that they’d be reducing rates 25 basis points by the end of this year — and a total of 125 basis points by end-2025. The interest rate swap market has priced in deeper cuts, penciling in 165 basis points of easing by the end of next year.