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- Introduction.
- What are the characteristics of TLT and what are the characteristics of ETFs?
- What is a long-term U.S. Treasury bond? How do they differ from short-term bonds?
- Why is TLT so sensitive to changes in interest rates?
- What is a simpler way to explain the relationship between long-term credits and interest rates?
- Who is TLT's management company?
- What is TLT's expense ratio?
- What is TLT's dividend yield?
- When are TLT distributions (dividends) paid?
- TLT's current share price and long-term chart
- What are the advantages of investing in TLT?
- What are the possible disadvantages of investing in TLT?
- What is TLT's distribution history?
- Why is TLT attracting attention now?
- In situations where interest rate trends are easy to predict, can we say that TLT price trends are also easy to read?
- What are the factors behind the article "TLT is not recommended" and the many searches for it?
- Can TLT be selected as a Nisa target?
- What similar ETFs are often compared to TLT?
- What are your predictions for future interest rate trends?
- What brokerage firms can I buy TLT stock from?
- summary
Introduction.
When investing, it is important to diversify risk and balance the portfolio in order to achieve stable returns.
A general recommendation is to hold 25% each in domestic stocks, domestic bonds, foreign stocks, and foreign bonds.
Investments that are heavily weighted toward certain sectors, such as high-tech stocks, are advantageous when the market is strong, but can face significant risks when the market declines.
However, like me, you may find it difficult to grasp the image of fixed income investment, especially for beginners, and find it difficult to approach.
Therefore, we will focus on how to invest in U.S. bonds through ETFs instead of buying bonds directly.
Of particular note is the TLT (iShares U.S. Government Bonds 20+ Year ETF), which is listed on NASDAQ.
This may be the best time to invest, as interest rate hikes due to the Federal Reserve's inflationary measures have slowed down.
This article examines TLT in detail and delves into its features and investment benefits.
Find out if TLT is right for your investment style in this article.
What are the characteristics of TLT and what are the characteristics of ETFs?
TLT (iShares U.S. Government Bond 20+ Year ETF) is an ETF with the following characteristics
The official name of this ETF is the iShares U.S. Government Bond 20+ Year ETF,The benchmark index is the ICE U.S. Treasury 20+ Year Bond Index.
TLT is traded on the NASDAQ stock exchange in the United States.
This index is,Invests in U.S. government bonds with maturities of 20 years or more; TLT aims to track the performance of this indexThe company states that it is a "company with a strong commitment to the environment.
Because TLT invests in U.S. government bonds,Very low credit risk, but sensitive to changes in interest rates; when interest rates rise, TLT prices tend to fallin the
However,Serve as a safe asset during periods of market instabilityThere are times when
TLT pays a monthly dividend and its dividend yield is relatively stable.
TLTs also provide diversification to the fixed income portion of the portfolio and may act as a hedge against stock market volatility.
Furthermore, TLTs are highly liquid and can easily be traded on a large scale.
Due to these features,TLT is suitable for investors seeking long-term fixed income investments or those who need to hedge against market volatility.
Learn more about ETFs here.
What is the U.S. Continuously Growing Dividend ETF VIG? - What is an ETF?
What is a long-term U.S. Treasury bond? How do they differ from short-term bonds?
Long-term U.S. Treasuries and short-term U.S. Treasuries are distinguished primarily by the time to maturity.
The characteristics of each are as follows
| feature | LTCB | TB |
|---|---|---|
| expiration date (on a credit card) | More than 10 years (generally 10, 20, or 30 years) | Less than 1 year to several years (e.g., less than 1 year for Treasury securities) |
| interest | Relatively high | relatively low |
| Price Sensitivity | Sensitive to interest rate fluctuations (prices fall when interest rates rise) | Relatively stable against interest rate fluctuations |
| risk profile | High inflation risk | low-risk |
| liquidity | relatively low | high |
Why is TLT so sensitive to changes in interest rates?
The reason why TLT is sensitive to changes in interest rates is primarily due to the characteristics of its component, long-term U.S. government bonds.
Long-term bonds and interest rates
- Bond prices and yields (interest rates) have an inverse relationship.As interest rates rise, existing low-yielding bonds lose their attractiveness and prices fall.
Conversely, when interest rates fall, existing high-yield bonds become more attractive and prices rise. - Long-term bonds are more sensitive than short-term bonds to changes in interest rates.This is because long-term bonds pay fixed interest rates in the future, and changes in interest rates have a significant impact on cash flows over the long term.
TLT Characteristics
- TLT invests in U.S. government bonds with maturities of 20 years or more. Since the price of these long-term bonds fluctuates widely due to changes in interest rates, TLT's value fluctuates accordingly.
- Due to the long duration (weighted average time to maturity) of the bonds held by TLT, they are highly sensitive to interest rate fluctuations.The longer the duration, the greater the impact even small changes in interest rates can have on prices.
- Market reaction to expected changes in interest rates (e.g., changes in central bank policy) will also affect the price of TLT.Investors make decisions to hold or sell long-term bonds based on their projections of future interest rate trends.
In other words, TLT is sensitive to changes in interest rates due to the characteristics of its component, long-term U.S. government bonds,When interest rates rise, TLT prices tend to fall, and when interest rates fall, prices tend to rise.
Investors should consider these characteristics when managing portfolios containing TLTs.
What is a simpler way to explain the relationship between long-term credits and interest rates?
When you borrow money from a bank, the bank charges you a little extra money in the form of "interest". This is the "interest rate.
Bonds are similar; they are issued when a government or company borrows money.
Buying bonds means lending money to the government or a company and receiving interest in return.
What is a long-term bond?
Long-term bonds are bonds issued by a government or company to borrow money over a longer period than 10 years. For example, the company lends money to the government over a 30-year period and receives regular interest payments from the government during that time.
Interest Rate Fluctuations and Long-Term Bonds
As interest rates fluctuate, the value of the bond also changes.
For example,Suppose your bond pays 31 TP3T of interest each year.
But if the newly issued bond pays 4% interest, your bond becomes less attractive.
Because the newer bonds earn more interest.
Sensitivity of long-term bonds
Long-term bonds are particularly sensitive to changes in interest rates.
Because,Because they pay fixed interest over a long period of time, when interest rates rise, newer bonds become more attractive and the value of older bonds declines. Conversely, when interest rates fall, older bonds become more valuable.
Thus, long-term bonds are characterized by the fact that their value changes significantly with changes in interest rates.
Who is TLT's management company?
The manager of TLT (iShares 20+ Year Treasury Bond ETF) is "BlackRock"; BlackRock is one of the largest asset managers in the world and offers many ETFs under the iShares brand.
iShares ETFs are known for their transparency, liquidity, and diverse product lineup, and TLT is one of them.
BlackRock offers a wide range of investment products on a global scale, serving clients ranging from individual investors to large institutional investors.
What is TLT's expense ratio?
Net Expense Ratio of TLT: 0.15%
This expense ratio represents the annual expenses associated with the management of the ETF and is calculated as a percentage of the total assets invested.
Expense ratios include operational, administrative, and other operating expenses.
The expense ratio of an ETF like TLT is part of the cost paid by the investor and is one of the factors that affect the overall return of the investment.
The expense ratio of 0.151 TP3T is relatively low compared to industry standards.
The previously mentioned "VIGThe expense ratio of passively managed ETFs, such as the "ETFs", is 0.06%, which is very low and attractive by comparison.
What is TLT's dividend yield?
TLT (iShares 20+ Year Treasury Bond ETF) currently has a dividend yield of 3.761 TP3T
The yield is the total annual amount of dividends paid by the ETF to investors divided by the ETF's share price.
Since dividend yields fluctuate depending on market conditions and ETF performance, it is important to check the latest information when investing.
When are TLT distributions (dividends) paid?
TLT typically pays a monthly distribution (dividend).
It is based on interest income earned from long-term U.S. government bonds held by TLT, which is distributed periodically to ETF holders.
The monthly distribution is based on the previously introduced "High Dividend ETF JEPIThe same is true for
Attractive for income investors.
TLT's current share price and long-term chart
TLT (iShares U.S. Government Bond 20+ Year ETF) has a relatively long history as it has been listed and managed on NASDAQ since July 2002.
Around October 2023, TLT hit a bottom of about $60, but prices have been on an upward trend since then and trading volume has been increasing.
Long-term price movements show the following trends.
Rate hikes and price declines:.In March 2023, the Fed begins raising interest rates to combat inflation. As a result, TLT prices drop significantly.
Low interest rates and rising prices during the Corona period:. During the coronavirus epidemic from 2020, the price of TLT had risen to a maximum of about $170 due to the low interest rate policy adopted.
Even using pre-Corona price levels as a reference, there is still room for price increases.
What are the advantages of investing in TLT?
The advantages of investing in TLT include
Stability and Reliability
TLT invests in long-term government bonds issued by the U.S. government.U.S. government bonds are among the most reliable bonds in the worldand the risk of default is considered very low.
Hedging interest rate risk
Long-term government bonds tend to rise in price when interest rates fall. Therefore, they function as a hedge against interest rate risk,This can be a lucrative investment, especially when interest rates are declining.
Dividend yield and monthly income income
TLT to make periodic dividend payments based on interest from government bonds it holds,Monthly dividends are paid.Investors receive a regular income.
Portfolio Diversification
Investing in TLT allows you to add fixed income assets to your investment portfolio, balancing the risks of equities and other asset classes.
low cost
ETFs like TLT generally have lower expense ratios than actively managed mutual funds, making them more cost efficient over time.
These advantages are particularly attractive to investors seeking long-term fixed income and those who need to hedge against market volatility.
However, because investments involve risk, it is important to fully consider one's own investment objectives and risk tolerance when making investment decisions involving TLT.
What are the possible disadvantages of investing in TLT?
There are also several disadvantages to investing in TLT.
Risk of interest rate rises: (1)Since TLT invests in long-term U.S. government bonds, a rise in interest rates directly translates into a decline in prices.As interest rates rise, existing low-yielding bonds lose their appeal and prices fall.
Market Volatility: (%)Long-term bonds are more sensitive to market fluctuations than short-term bonds, so changes in economic conditions or monetary policy can have a significant impact on TLT prices.
Inflation risk: (1)Due to fixed yields over long periods of time, there is a risk that real returns will decrease if inflation increases more than expected.
Variation of the yield curve: (%)Changes in the shape of the yield curve (Yield Curve) can affect the performance of long-term bonds. For example, a flattening or reversal of the yield curve could make long-term bonds less attractive.
It is important to understand these disadvantages and consider them in light of one's own investment strategy and risk tolerance.
What is TLT's distribution history?
TLT's distribution is back around the pre-Corona level, around $0.25-0.3.
| ex rights day | Unit price of distribution ($) |
|---|---|
| 2023/12/14 | 0.310534 |
| 2023/12/01 | 0.28892 |
| 2023/11/01 | 0.286291 |
| 2023/10/02 | 0.280014 |
| 2023/09/01 | 0.288579 |
| 2023/08/01 | 0.275282 |
| 2023/07/03 | 0.277716 |
| 2023/06/01 | 0.273047 |
| 2023/05/01 | 0.267995 |
| 2023/04/03 | 0.268755 |
| 2023/03/01 | 0.249766 |
| 2023/02/01 | 0.275496 |
| 2022/12/15 | 0.261059 |
| 2022/12/01 | 0.244243 |
| 2022/11/01 | 0.235637 |
| 2022/10/03 | 0.244114 |
| 2022/09/01 | 0.236135 |
| 2022/08/01 | 0.213043 |
| 2022/07/01 | 0.226939 |
| 2022/06/01 | 0.207438 |
| 2022/05/02 | 0.20313 |
| 2022/04/01 | 0.201727 |
| 2022/03/01 | 0.184723 |
| 2022/02/01 | 0.198134 |
| 2021/12/16 | 0.167606 |
| 2021/12/01 | 0.184159 |
| 2021/11/01 | 0.188215 |
| 2021/10/01 | 0.183085 |
| 2021/09/01 | 0.189348 |
| 2021/08/02 | 0.181723 |
| 2021/07/01 | 0.187502 |
| 2021/06/01 | 0.199272 |
| 2021/05/03 | 0.203071 |
| 2021/04/01 | 0.185064 |
| 2021/03/01 | 0.171726 |
| 2021/02/01 | 0.175774 |
| 2020/12/17 | 0.163928 |
| 2020/12/01 | 0.163003 |
| 2020/11/02 | 0.169451 |
| 2020/10/01 | 0.16906 |
| 2020/09/01 | 0.18292 |
| 2020/08/03 | 0.19014 |
| 2020/07/01 | 0.191656 |
| 2020/06/01 | 0.210189 |
| 2020/05/01 | 0.216207 |
| 2020/04/01 | 0.238017 |
| 2020/03/02 | 0.229242 |
| 2020/02/03 | 0.241966 |
Why is TLT attracting attention now?
TLT (iShares U.S. Government Bond 20+ Year ETF) is currently in the spotlight primarily because of the following factors
Cooling inflation and interest rate outlook
There is a growing belief that U.S. inflation is on a cooling trend. Due to this,The growing likelihood that the Federal Reserve will stop raising interest rates has increased investor interest in long-term government bonds.
Since no further rise in interest rates is expected, the price decline of TLTs has been halted and the risk of a decline has been reduced.
Increased demand for long-term government bonds
Expectations of a lull in rising interest rates have increased demand for long-term government bonds, and the price of TLTs, which invest in long-term government bonds, is on an upward trend.
Due to these factors, TLT is currently attracting a great deal of attention from investors.
Investors sensitive to inflation trends and changes in interest rate policy can add TLTs to their portfolios as a hedge against market volatility
In situations where interest rate trends are easy to predict, can we say that TLT price trends are also easy to read?
When interest rate trends are predictable, e.g., when the central bank's policy policy is clear, TLT price trends also tend to be more predictable.
Particularly,If interest rates are expected to decline, TLT prices will likely increase.
Since financial markets are sensitive to interest rate movements, it is common for TLT prices to move based on market readings of future movements in interest rates.
What are the factors behind the article "TLT is not recommended" and the many searches for it?
The main factors that lead to the article, "TLT is not recommended," are as follows
Interest rate risk and market volatility
Since TLT invests in long-term U.S. government bonds, a rise in interest rates is directly linked to a decline in prices. In recent financial markets, the trend of interest rates is still uncertain, and investing in TLT is seen as entailing a certain degree of risk.
exchange risk
Price increases in TLTs occur as U.S. long-term interest rates decline. As interest rates fall, existing high-yield bonds become more attractive and prices rise.
However, a decline in dollar interest rates could weaken the dollar against the yen.
This is because as U.S. interest rates fall, dollar-denominated assets become less attractive and investors move to other currencies and assets.
As the yen strengthens against the dollar, the foreign exchange cost for Japanese investors to purchase dollar-denominated assets (e.g., TLTs) will increase, which may reduce the gains from their investments in TLTs.
These factors may cause the company to view the investment as unsuitable for the current market environment.
Can TLT be selected as a Nisa target?
- Although it is possible to trade within the general NISA framework, it is not possible to invest in TLT using a TLT through a savings NISA (nasaseitate NISA), and thus cannot enjoy the benefits of a savings NISA.
- Only domestic investment trusts (and some domestic ETFs) that meet certain requirements can be invested in the TEMITATE NISA, and not TLTs, which are overseas ETFs.
What similar ETFs are often compared to TLT?
Similar ETFs that are often compared to TLT (iShares U.S. Government Bond 20+ Year ETF) include
VGLT (Vanguard U.S. Long-Term Government Bond ETF)
VGLT (Vanguard Long-Term Treasury ETF) is a Vanguard ETF that invests in U.S. government bonds with maturities of 10 years or more; like TLT, it is exposed to the long-term U.S. government bond market but has a slightly different investment strategy and cost structure because it is a Vanguard product.
EDV (Vanguard Ultra Long-Term U.S. Treasury Bond ETF)
EDV (Vanguard Extended Duration Treasury ETF)is an ETF that invests in U.S. government bonds with maturities of 20 years or more, with a particular focus on longer-term government bonds.
They have even longer durations than TLTs and may be more sensitive to interest rate movements.
UST (ProShares Ultra 7-10 Year Treasury Bond)
UST (ProShares Ultra 7-10 Year Treasury ETF) is an ETF that invests in U.S. government bonds with maturities of 7 to 10 years.
Because it focuses on shorter maturity government bonds than TLT, it has different sensitivity to interest rate changes.
TLH (iShares U.S. Government Bond 10-20 Year ETF)
TLH（iShares 10-20 Year Treasury Bond ETF）は、満期が10年から20年の米国国債に投資するETFで、TLTよりも若干短い満期の国債に投資している。TLTと比較して異なるリスク・リターンプロファイルを持っている。
These ETFs, like TLT, are exposed to the U.S. government bond market, but each has a different maturity range, investment strategy, and cost structure, so investors should select the appropriate ETF based on their own investment objectives and risk tolerance.
TMF (Direxion Daily 20+ Year US Treasury Bull 3x ETF)
TMFis a leveraged ETF that aims for 3001 TP3T of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index and reflects the daily movement of the index amplified by a factor of 3.
TMF invests in U.S. Treasury securities with a remaining maturity of 20 years or more.
What are your predictions for future interest rate trends?
The forecast for future interest rate trends is based on several factors, and the following observations are made
Current and projected interest rates
At the end of 2023, the average U.S. 30-year fixed mortgage rate fell to 6.951 TP3T. This is due to signs of receding inflationary pressures.
Federal Reserve System (Fed) Policy
The Federal Open Market Committee (FOMC) decides to keep the benchmark federal funds rate unchanged at its last meeting in 2023. This means a pause in interest rate hikes.
Interest rate forecast for 2024
Experts expect interest rates to ease in 2024. As inflation improves and the Fed rate cut approaches, mortgage rates could be near 6.51 TP3T by year-end.
Long-term outlook
Interest rates are projected to trend lower in 2024, but the specific timing and extent of the decline is uncertain. Interest rates could move differently depending on a resurgence of inflation and economic conditions.
According to these projections,Interest rates are likely to ease in the future, but market uncertainty and changes in economic data could alter the forecast.
It is important to consider all of these factors together when forecasting interest rate trends.
What brokerage firms can I buy TLT stock from?
We have listed the major brokerages that offer TLT shares. At these brokerages, you can choose to invest as a CFD (Contract for Difference) in addition to direct stock trading as a foreign stock.
I myself mainly use SBI Securities, but some stocks they handle may not be available for purchase. In such cases, I sometimes use CFDs at Saxo Bank Securities or IG Securities.
| Popular Brokerage Firms | stock trading | CFD Trading |
|---|---|---|
| SBI Securities | Fat. | ✕ |
| Matsui Securities Co. | Fat. | ✕ |
| Rakuten Securities, Inc. | Fat. | ✕ |
| Monex, Inc. | Fat. | ✕ |
| au kabu.com Securities | Fat. | ✕ |
| DMM Stock | ✕ | ✕ |
| Saxo Bank Securities | Fat. | Fat. |
| IG Securities | ✕ | Fat. |
| GMO CLICK Securities, Inc. | ✕ | ✕ |
| moomoo Securities | Fat. | ✕ |
summary
We looked in detail at the characteristics of the TLT long-term U.S. bond ETF, the advantages and disadvantages of investing in TLT, and the relationship between bonds and interest rates.
TLT is an investment security with characteristics that are inversely correlated with interest rates, and may be a relatively safe investment during periods when interest rate trends are more predictable.
Although the risk of a Fed rate hike cannot be completely ruled out, the risk of a TLT price decline is lessened in the current situation as inflationary measures have run their course and the need for an interest rate hike has been reduced. In addition, TLT prices are likely to rise in a phase of lower interest rates.
TLT offers a relatively high dividend yield and the potential for monthly income, making it an attractive option for investors seeking stable dividend income.
I myself have not considered investing in bond ETFs in the past, but I have decided that TLTs are the best time to invest, both as a portfolio balancing exercise and because interest rate forecasts make it easier to read future price trends, and I plan to gradually add more investments.
However, it may be important to consider investing in dollar terms, as a drop in U.S. interest rates could lead to a stronger yen.
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