TLT and TMF, the ETFs linked to long-term U.S. Treasuries, explained!
Hi, Cantom here.
I suggest you keep an eye on the Fed’s policy rate decisions while making investment decisions, and the investment issues I deal with include U.S. long-term bond-linked ETFs. I will explain the bull ETFs, TLT and TMF so you can refer to them before trading.
The inverse version of the above ETFs, TBF and TMV, is explained in this article.
Contents
Why a U.S. long-term bond-linked ETF?
I see the following advantages to investing in bond ETFs like TLT.
- Government bonds are the most informative investment instrument
- You will understand economic cycles
- You will understand the impact of interest rates on stocks and exchange rates.
- Because of their modest volatility, even beginners are less likely to get into serious trouble.
- They can be used as a risk hedge, as they tend to rise in price during stock market crashes.
Cantom strongly recommends that investment beginners start by studying TLT!
About TLT
This product is linked to the price fluctuations of U.S. Treasury bonds that have more than 20 years to maturity. As an investor, you can make an investment decision by thinking of it as being linked to a 30-year bond. It is a very defensive instrument, and its price will rise during a crisis, such as a stock market crash (a lower interest rate is a prerequisite). In some cases, it may be more attractive than high dividend stocks depending on the timing since interest dividends can also be expected.
| Name | iShares 20+ Year Treasury Bond ETF |
| Ticker | TLT |
| Managed by | iShares by Black Rock |
| Management fee | 0.15% |
| Holdings | UNITED STATES TREASURY （99.48％） |
| Official website | https://www.ishares.com/us/products/239454/ishares-20-year-treasury-bond-etf |
About TMF
The product’s official description is that it aims to triple the daily price fluctuation of ICE U.S. Treasury 20+ year bonds (before expenses). The official explanation is complicated, so from an investor’s perspective, there should be no significant problems if you recognize that the product is a TLT with 3x leverage. One point to note is that this 3x movement is a target value, and since it is calculated daily, the rate of change will not simply be 3x that of TLT if held for an extended period. Depending on the timing, the risk is limited even if held for an extended period, but as a general rule, this product is suitable for day trading.
| Name | Direxion Daily 20+ Year Treasury Bull 3X Shares |
| Ticker | TMF |
| Managed by | Direxion |
| Management fee | 1.00% |
| Holdings | U.S. Treasuries 27-30: 42.28% 24-27: 31.50% 20-24: 26.20% |
| Official website | https://www.direxion.com/product/daily-20-year-treasury-bull-bear-3x-etfs |
Summary
Studying bonds and interest rates through issues such as TLT is the best gateway to start investing because it allows you to absorb the knowledge you need as an investor systematically. For more information on investment timing for bull-type ETFs linked to long-term U.S. Treasury bonds, you may find my article “Interest Rates (1): Long-Term Interest Rates and Bond Price Fluctuations” helpful. Please read this article for a logical image of long-term bond price movements.
I would be happy if you find it useful.
