TLT Investors Brace For Friday Inflation Data With Bond Market In Turmoil

Zinger Key Points
  • TLT investors eye Friday's PCE inflation data, hoping for signs that inflation is nearing the Fed's 2% target amid recent market volatility.
  • Trump’s policies (tax cuts for the wealthy and increased spending) could disrupt the bond market, PIMCO's Bill Gross Gross says.

The iShares 20+ Year Treasury Bond ETF TLT has been on a tumultuous journey, grappling with a 12.85% decline over the past year and a 10% drop year-to-date.

As market participants nervously eye the horizon, the upcoming release of the Personal Consumption Expenditures (PCE) Price Index by the Bureau of Economic Analysis on Friday could be a pivotal moment for TLT investors.

Treasury Yields Spike Amid Weak Demand

This week, the bond market’s anxiety was palpable as two U.S. government-debt auctions faced tepid demand, causing Treasury yields to spike.

This surge in yields led to a nearly 3% drop in bond prices over just two trading days, as reflected in the TLT's performance.

Chart: Benzinga Pro

Investors are eagerly anticipating the PCE inflation data, hoping for signs that inflation is edging closer to the Federal Reserve's 2% target.

Inflation Data: A Potential Turning Point?

The Cleveland Fed's "Nowcast" offers hope, predicting a monthly PCE increase of 0.10%, down from 0.3% in March, with a yearly increase of 2.7%. Should these forecasts hold true, Friday’s data might provide much-needed relief to beleaguered TLT investors.

Conversely, any unexpected uptick in inflation could further drive bond prices down, exacerbating the current bearish trend.

Technical Indicators Signal Bearish Trends

Chart: Benzinga Pro

The technical outlook for TLT remains grim. The ETF's current price of $89.61 sits below its 8, 20, and 50-day simple moving averages (SMAs), indicating strong bearish momentum.

Specifically:

  • 8-day SMA: $90.69 (Bearish Signal)
  • 20-day SMA: $90.65 (Bearish Signal)
  • 50-day SMA: $90.73 (Bearish Signal)
  • 200-day SMA: $92.09 (Bearish Signal)

These indicators suggest continued selling pressure, underscoring the challenging environment for TLT.

Political Uncertainty and Market Implications

Adding to the complexity, political developments could significantly impact the bond market.

Bill Gross, the billionaire co-founder of PIMCO, recently highlighted that a Donald Trump victory in the upcoming presidential election could be bearish for bonds compared to a Joe Biden re-election.

Gross pointed out that Trump's policies, which include continued tax cuts and increased spending, could further disrupt the bond market.

Related: Trump Victory ‘More Bearish’ For Debt Market Than A Biden Win, Warns ‘Bond King’ Bill Gross

Looking Ahead: Navigating Market Volatility

For TLT investors, the immediate focus is on the PCE inflation data. A favorable report could stabilize bond prices and provide a temporary respite.

However, the broader market context—characterized by technical bearish signals and political uncertainties—demands cautious optimism and readiness to adjust strategies as new data and developments unfold.

Read Next: Once The Dollar Breaks Down, Peter Schiff Warns Of Run-Away Inflation – ‘Investors Are Completely Unprepared’

Image: Shutterstock

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Posted In: BondsSpecialty ETFsTechnicalsTop StoriesMarketsTrading IdeasETFsBill GrossDonald TrumpExpert IdeasInflationJoe BidenStories That Matter
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