The iShares 20+ Year Treasury Bond ETF (TLT) dropped 1.1% following the release of two highly watched economic reports that revealed inflationary pressures are not abating.
The number of U.S. job openings jumped to 8.1 million in November, surging past the 7.7 million expected, and rising from 7.8 million in October, according to Bureau of Labor Statistics data released Tuesday in its Job Openings and Labor Turnover Survey (JOLTS).
Higher job openings in the JOLTS report indicate strong labor demand, which can tighten the job market, push wages higher, and increase inflationary pressures in the economy.
Meanwhile, the ISM U.S. Services PMI increased to 54.1 in December from 52.1 in November, topping the 53.5 consensus, according to Institute of Supply Management data reported on Tuesday.
An index reading over 50 indicates expansion, and this latest reading marks the sixth straight month in which services sector activity expanded.
Inflationary economic data typically prompts the Federal Reserve to adopt tighter monetary policy by raising interest rates or maintaining a hawkish stance to curb inflation, which can drive Treasury yields higher as bond prices fall. For long-term Treasury bond ETFs like TLT, which are more sensitive to interest rate changes than shorter duration bond ETFs, this dynamic often results in price declines because rising yields reduce the present value of their fixed-income payments.
Since the Fed’s jumbo 50-basis-point Sept. 18 rate cut, and two subsequent 25-bp cuts, the bond market has grown increasingly nervous as economic data has not fallen in line with the Fed’s disinflationary expectations.
The bond market’s selloff suggests that fixed-income investors fear the Fed may have declared a soft-landing victory too soon. Adding fuel to fear, the inflationary potential of tariffs and tax cuts in a new Trump administration also loom in 2025.
Since the beginning of the Fed’s new rate cut cycle in September, TLT’s price has fallen more than 15% as stubborn inflation has all but eliminated the chance of a January rate cut. Those higher prices are also widening the odds of a rate cut at the following FOMC meeting in March.
As of midday Tuesday, the CME FedWatch Tool, which predicts Fed rate decisions based on Fed Funds Futures prices, gave a 95% probability of a Fed pause this month, and a 60% chance of a pause in March.
Permalink | © Copyright 2025 etf.com. All rights reserved
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel
