TLH ETF

The iShares 10-20 Year Treasury Bond ETF (TLH) is a high duration exposure, making it sensitive to changes in expectations and actualities around benchmark yields. Rising oil prices from recent weaker levels on strong demand data and potential geopolitical conflicts could limit rate cuts, which is bad for duration bets. Strong wage growth and payroll data and high inflation expectations in consumer surveys reflect underlying inflation that may otherwise be above policy targets without the help of commodity deflation.

Inflation and interest rates are remaining high. Inflation is not really going down, and inflation expectations are going to make the figure resistant to decline. We aren't even seeing unemployment kick in to pressure inflation rates given current rates.

The TLH is a duration bet that may not be favorable in the current interest rate environment. We believe higher rates will be needed in 2024 and even 2025, in order to impact inflation through the corporate channel. The impact of higher rates on consumers has been limited, but businesses and corporate earnings will drive recessionary pressures more through restructuring efforts and lower employment.

Long-term bonds look appealing to Wells Fargo Investment Institute after they were hurt by a surge in yields.

Shares of exchange-traded funds that buy U.S. Treasury bonds with long-term maturities fell Monday, after three straight weeks of declines, as Goldman Sachs Group analysts forecast the Federal Reserve may cut interest rates next year.

TLH is a long-duration bet in a risky environment for long-duration plays. Long-term rates are in flux, and it concerns how difficult the last leg of inflation will be to achieve. Signs like last year's inflation expectations for 2024 point to this being the limit of what easy lapping of data and supply chain resolutions will fix.

TLH holds treasury bonds in the 10-20 year range. For leaving the safety of shorter-term yields, you get the double penalty of lower yields and higher risk.