ANGELA WEISS / Getty Contributor
- The biggest bond ETF hit a new low since July 2007 as the bond market meltdown continues.
- The iShares 20+ Year Treasury Bond ETF (TLT) has shed over 50% since its closing high in 2020.
- Bond ETFs, which track bond values, became popular in 2020 amid the pandemic market volatility.
The biggest bond ETF continued to crater Thursday amid an incessant Treasury sell-off.
The iShares 20+ Year Treasury Bond ETF (TLT), which tracks an index of Treasurys with maturities of 20 years and more, touched the lowest level since July 2007, currently down 1.4% for the day and 15.5% this year.
The TLT ETF has lost over a whopping 50% since its closing high in 2020, the biggest decline since its inception in 2002.
Unlike the conventional bond market, bond ETFs are traded on an exchange, like any other stock. They track the value of a portfolio of bonds, not its yields.
Treasurys are in the midst of a historic collapse that's been made worse in recent months by Fed rate hikes and growing angst over federal deficits.
And when bond prices fall, yields rise. Yields on the 10-year Treasury are close to 5%, up from 3.3% earlier this year — that's a massive jump for bond yields in a relatively short time.
Treasury yields spiked again on Thursday after Fed Chair Jerome Powell said the central bank's rate hikes could kick in again if tightness in the labor market doesn't abate.
Other bond ETFs like the iShares 1-3 Year and iShares 7-10 Year Treasury Bond ETFs have also been trading lower amid the bond market meltdown.
Bond ETFs took off in 2020 when pandemic-driven volatility had investors clustering in safe assets. Like any other ETF, one bond ETF can offer exposure to large numbers of bonds, giving investors an opportunity to diversify their portfolio.