To The Moon

The $iShares 20+ Year Treasury Bond ETF(TLT)$  has retreated 4.7% since May 1, 2025, trading at $84.55 as of May 24. This places TLT just 1.5% above its 52-week low of $83.30 , signaling a potential entry point for investors seeking exposure to long-dated U.S. Treasuries. Key metrics:

Dividend Yield: 3.76% (attractive vs. historical averages)

Support Level: $84.39 (May 23 low)

52-Week Range : $83.30 – $101.64

Catalysts for the Dip

Recent volatility stems from:

Fiscal Concerns: Political gridlock over U.S. budget legislation and rising deficit worries (Moody’s downgrade of U.S. credit outlook).

Rate Cut Delays: Fed officials signaling rates may stay elevated until at least September 2025.

Technical Pressure: 10-year Treasury yields breached 4.5% , a psychologically critical level.

Why TLT is Undervalued

Rate Cut Sensitivity: TLT’s duration (~20 years) makes it a prime beneficiary of eventual Fed easing. Futures markets price in two rate cuts in 2025, which could drive bond prices higher.

Institutional Accumulation:

Capital Flows: Net inflows of $66.7M on May 22 suggest institutional buying.

Options Activity: Heavy call volume at $85 strike (29,570 open contracts) implies bullish bets on a near-term rebound.

Yield Advantage: At 3.76%, TLT’s yield outpaces the S&P 500’s dividend yield (~1.5%) and offers a hedge against equity volatility.

Technical & Sentiment Indicators

Oversold Signal: TLT trades near the lower Bollinger Band (20-day), with RSI at 28.

Short Interest: Short volume ratio spiked to 27.8% on May 22 , raising potential for a short-covering rally.

Risks to Monitor

Sticky Inflation: Delayed rate cuts could prolong pressure.

Fiscal Uncertainty: U.S. debt ceiling debates and deficit concerns may weigh on sentiment.

Strategic Takeaway

TLT’s current dip reflects short-term macro fears rather than structural flaws. With a 3.76% yield and asymmetric upside from eventual Fed dovishness, accumulating TLT at these levels offers:

Income: Attractive yield in a low-rate environment.

Capital Appreciation: Potential 10–15% upside if 10-year yields retreat to 4.0%.

Action: Buy TLT below $85 with a 12-month target of $95–$98.

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