Bullish on TLT: Favorable Risk-Reward as Rates Will Likely Drop

The iShares 20+ Year Treasury Bond ETF (TLT) is expected to experience favorable risk-reward due to anticipated rate drops. Last written about in April 2024, the ETF was trading at around $91 per share and reached $100 per share by the end of the year. With rates likely to drop, investors may see further gains in TLT.

Treasury yields experienced a slight increase ahead of a significant 30-year bond sale, with US 10-year yields rising to 4.36% on July 10, 2025 [1]. This increase, driven by strong demand for 10-year notes, comes as the Treasury prepares to sell $22 billion of 30-year debt at 1 p.m. New York time. Analysts at JP Morgan Chase & Co. predict the auction will proceed smoothly, citing supportive valuations and low volatility [1].

The iShares 20+ Year Treasury Bond ETF (TLT) is expected to experience favorable risk-reward due to anticipated rate drops. Last written about in April 2024, the ETF was trading at around $91 per share and reached $100 per share by the end of the year. With rates likely to drop, investors may see further gains in TLT.

The recent focus on fiscal policy has driven bond yields higher. US bond yields have risen since President Donald Trump signed his tax bill into law, adding an estimated $3.4 trillion to deficits over the next decade, according to the non-partisan Congressional Budget Office. Similarly, UK and Japanese bond yields have increased due to fears of increased government borrowing to finance spending [1].

Initial US jobless claims fell for a fourth week to 227,000, slightly below the 235,000 expected by economists polled by Bloomberg. Despite this positive economic data, treasuries were little changed after the release [1]. Interest rate swaps continue to imply the Federal Reserve will hold interest rates steady later this month, with two quarter-point reductions by year-end.

In conclusion, the expected drop in interest rates may present a favorable environment for the iShares 20+ Year Treasury Bond ETF (TLT). Investors should closely monitor the upcoming 30-year bond auction and any subsequent changes in fiscal policy.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-10/treasuries-slip-before-30-year-bond-sale-weekly-jobs-numbers