A subscriber emailed me last week asking if it was time to buy TLT, the 20+ year Treasury ETF, at 84.
My answer was no.
The bond dropped further.
This is the same trap that blew up the dip buyers at 89 and 90.
Every leg lower brings a new round of traders convinced this is the bottom.
Stick with me for the next four minutes.
You’ll walk away knowing why TLT isn’t investable, what’s actually moving it, and how to trade it without getting buried.
Oil Is The Tell
What’s moving TLT day to day right now is oil. Not the Fed. Not the jobs print. Not the auctions.
Oil backing off today is the only reason TLT bounced from 82 to 85.
Oil up tomorrow, and the bounce dies. That’s the relationship running this bond right now.
If you want to know where TLT is headed tomorrow, stop watching the bond. Watch crude. It’s been the swing factor for weeks.
Today, crude was down more than two and a quarter at one point. That’s what put a bid under TLT.
Take crude away, and the bid disappears.
Inflation Isn’t Done
I do not believe we are done going up on rates.
The long bond yield could still hit a 5.5% or 5.6% from here.
I’m not predicting it…I’m telling you it’s on the table, and it’s the reason I won’t commit capital.
Warsh is in a terrible, terrible position at the Fed. He has no good options, and the bond market knows it.
Until inflation is completely under control and actually coming down, there is no investment case for TLT.
It isn’t coming down right now. So there’s no case right now.
The people calling for a TLT bottom have been wrong at 89, wrong at 90, and now wrong again at 84. The pattern tells you what the market thinks of those calls.
The Theta Decay Trap
TLT pays a 4.45% yield. In isolation, that sounds fantastic.
Every tick higher in rates eats the price of the bond. The price erosion offsets the yield and then some.
That’s why the traders who bought at 89 and 90 are still underwater even with the dividends counted. The yield never had a chance to catch up to the price damage.
The longer you hold TLT in a rising rate environment, the more the decay works against you. Holding becomes its own losing position.
This is not a buy-and-forget instrument. It punishes patience.
If you came into this thinking you were going to clip the coupon and ride it out, the math is not on your side.
How To Engage It
You can trade TLT. You cannot invest in it.
Here are the rules I’d hand you if you worked on my desk:
Trade the washouts. When TLT flushes lower and the bid finally shows up, that’s a swing setup. Not a position.
Short the lower lows. When the bond fails to hold prior support, the algos defend the move down. That’s where the three-buck wins live, the same way I booked Interactive Brokers (IBKR) last week.
Book quickly. Take three or four points and walk. Do not let a winning trade turn into a thesis.
Watch crude every day. Oil down, TLT up. Oil up, TLT down. That’s your daily compass.
Do not buy and close your eyes. Do not put TLT in your account and go on a 45-day world cruise.
The bond market needs to be completely washed out before there’s a real investment case here. We are not there.
When we are there, you’ll know it because oil will be cooperating and inflation will be visibly rolling over. Neither is true today.
Until then, every dip is a trade. Not a position.
If you worked for me and bought TLT as an investment at 84 last week, I’d have you out of it by now. You’d be a trader on this bond. Not an investor.
The difference between those two words is what protects your account in a tape like this one.
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