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Though the second half of Could was weak for US Treasuries, long-term US Treasuries delivered constructive returns in Could because the iShares 20+ Yr Treasury Bond ETF (TLT) rose 2.9%. Regardless of this rally, TLT has has been in a gentle downward pattern for who is aware of how lengthy.
It is onerous to consider a inventory, index or asset class that has been in a extra pronounced downtrend over the previous two years. Whereas there have been many events throughout this era when TLT rose above its 50 and 200 DMAs, they didn’t final lengthy.
The chart under reveals the annual return of the Financial institution of America 10+ Yr Treasury Index over the previous one, two, 5, ten and twenty years. Whereas long-dated Treasuries have averaged about 8% a 12 months because the late Nineteen Seventies, efficiency has been flat in recent times shut to those ranges.
Lengthy-dated Treasuries have fallen almost 7% over the previous 12 months, and annualized yields have fallen 7.3% over the previous two years. Even over the past 5 years, the annual return continues to be detrimental 4%. It is solely while you get out in ten years that the annualized return turns into constructive, and at 0.5% that is hardly something!
The previous couple of years could possibly be one of many worst durations within the historical past of US Treasuries. The chart under reveals the year-over-year adjustments within the BofA 10+ Yr US Treasury Complete Return Index.
Whereas there have been many months (15) prior to now 40 months through which US Treasuries have had a constructive return, there has solely been one through which the index has had a constructive year-over-year return.
As proven within the chart under, the one different interval the place Y/Y returns had been almost as correspondingly detrimental was from October 1979 to October 1981, however even then there have been three constructive Y/Y figures in a shorter interval. 25-month interval.
Additionally, the magnitude of the y/y decline within the late Nineteen Seventies and early Eighties was not as deep because the losses within the present interval.
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Editor’s be aware: The bullet factors for this text had been chosen by the editors of Looking for Alpha.