Episode summary
TLT ETF: Why Retail Investors Are Buying the Wrong Bond Fund
Summary
The host argues that retail investors are misreading the recent bond sell-off by piling into TLT, the 20-year Treasury ETF, while rates are rising. He says $61 million bought on Wednesday, after $59 million on Tuesday and $50 million on Monday, shows inexperience with the link between duration, bond prices, and interest rates. In his view, if someone wants to trade bond-price swings, a longer-duration 30-year ETF like UTHY would be the more direct expression of that view.
For investors mainly seeking income, the host says long-dated bonds are not attractive right now and prefers short-term U.S. Treasury money market funds such as SNOXX, which he says are yielding about 4% and avoid the volatility of long-duration bonds. He frames the move in yields as a repricing process that should be waited out rather than fought.
He says this is not a crisis on the scale of 2008, COVID, or the dot-com crash, but it does mean more volatility ahead. The stocks most at risk, he says, are speculative companies with no consistent earnings and heavily leveraged businesses, while the broader portfolio impact should be manageable if investors avoid panicking.
Key takeaways
- The host says retail investors are buying the wrong bond fund by rushing into TLT while rates are moving higher.
- He cites about $170 million of TLT buying in three days, including $61 million on Wednesday, as evidence of inexperienced duration positioning.
- He says a 30-year Treasury ETF like UTHY would be the cleaner trade if the goal is to benefit from larger bond-price swings.
- For income, the host prefers short-term U.S. Treasury money market funds such as SNOXX and says they are paying about 4%.
- He expects more volatility in speculative and highly leveraged stocks, but says this is not a 2008-style brace-for-impact event.
Notable quotes
“retail investors are rushing into Treasury ETFs. Specifically, they're rushing into a 20-year Treasury bond ETF. TLT is the symbol”
“they don't understand really the relationship between duration, bond prices, and interest rates because they wouldn't be buying this one”
“last Wednesday, about $61 million worth of this ETF, TLT, which was their largest purchase in 12 months”
“if the retail investors wanted to trade the decline in bond, they would probably buy the 30-year Treasury, basically, which is UTHY”
“I would rather wait for this sell-off to be over, for this rise in yields, this repricing in yields to be over before I try to be a hero”
How the episode opens
Good morning. This is Dylan Jovine with Behind the Market. Happy Friday.
Today's Friday, October 9th. TGIF. Today I'd like to talk about the sell-off in stocks and bonds that is being driven by rates going higher.
And you know, we always keep an eye on the 10-year yield, but rates are going higher. You know, there's a lot of demand for bonds, for money from AI companies and governments. And you know, what you see here is retail investors are rushing into Treasury ETFs.
Specifically, they're rushing into a 20-year Treasury bond ETF. TLT is the symbol. And you could see that, you know, there you could tell they're inexperienced here.
You can tell they don't understand really the relationship between duration, bond prices, and interest rates because they wouldn't be buying this one. You know, it's easy to understand why because, you know, because this is kind of a new market for a lot of investors my age and lower, especially if you haven't been on Wall Street. I mean, who's really been focused on the bond market for the past 20 years?
I mean, it's kind of, you know, I mean, really just interest rates so low for such a long period of time. You know, there's really been not much going on here for a period of time after rates went down after 2009. So, it's really kind of been dead money for a while.
But you have these investors rushing in. And you know, what you see is last Wednesday, about $61 million worth of this ETF, TLT, which was their largest purchase in 12 months. That followed 59 million on Tuesday, 50 million on Monday.
So, we're talking about $170 million buying this one ETF, which, you know, is kind of a, you know, it's not a big, big ETF here.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bond duration
- interest rates
- etf flows
- treasury money market
- portfolio volatility
Companies and tickers mentioned
- TLT
- TLT (iShares 20+ Year Treasury Bond ETF)
Watch the episode
Watch “TLT ETF: Why Retail Investors Are Buying the Wrong Bond Fund” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Behind The Markets Podcast
-
Nvidia CEO Out: 4 Reasons I’m Not Panicking About Nvidia -
The Mag 7 Sell-Off: My 3 Secrets to Picking Stocks -
Morgan Stanley’s AI Winners List Is Full of Bank Stocks -
Anthropic IPO: Why I’m Not Rushing to Buy at $1 Trillion -
Chip Stocks Sell-Off: Why the AI Build-Out Just Went From 3 to 5 Years -
Midterm Election Results: The Stock Market’s Winners and Losers
Behind The Markets Podcast, this episode and its artwork belong to their owners. Octagon is not affiliated with the show; this page is an independent summary.
