Treasury Yields Rise On Stagflation Threats: Investors Flock To Long-Term Treasury ETFs Expecting Weaker Growth Ahead

Thursday is a negative session for U.S. Treasuries with yields markedly rising across all maturities of the yield curve. 

The yield on the 10-year benchmark surged back above the 3.5% level, up 6 basis points, while the yield on the two-year note increased to 4.06%, up 10 basis points, as of this writing. 

Yields on the 30-year bond also saw a jump of 5 basis points, to 3.75%.

Treasury ETFs were all trading lower for the day, with the iShares 20 Plus Year Treasury Bond ETF TLT down 0.9%, the iShares 7-10 Year Treasury Bond ETF IEF down 0.5%, and the iShares 1-3 Year Treasury Bond ETF SHY down 0.2%. 

Chart: U.S. Treasury Yields Rose On Thursday

Stagflation Fears Rising: The Bureau of Economic Analysis reported today that the U.S. GDP increased at a 1.1% quarter-on-quarter annualized rate in the first quarter of 2023, down from 2.6% in the fourth quarter of 2022 and significantly below the 2% projected by experts. 

The GDP report also unveiled an alarming acceleration in the price index for gross domestic purchases, up to 3.8% in the fourth quarter of 2022 from 3.6%. 

The recent economic statistics indicating a slowing real gross output mixed with persistent price pressures have heightened investor concerns about stagflation. 

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Latest Treasury ETFs Flow Data: Looking at the past three weeks of data, investors continued to prefer allocating their funds to ETFs investing in longer-term Treasuries.  

The iShares 20+ Year Treasury Bond ETF (TLT) is on track to post its third straight week of inflows. Following a $1.15 billion influx in the week ending April 19, which was the strongest week in 2023, an additional $304.6 million has flowed to TLT so far this week, according to data provided by Koyfin. 

The iShares 1-3 Year Treasury Bond had $262 million in withdrawals last week, with an additional $16 million flowing out this week.

The iShares 7-10 Year Treasury Bond is now witnessing outflows of $357 million this week, escalating the divestment from the $29.5 million fled previous week. 

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