##  [# TLT Drops as Markets Brace for a “Hawkish Cut” From the Fed](/sections/features/tlt-drops-markets-brace-hawkish-cut-fed) 

 

# TLT Drops as Markets Brace for a “Hawkish Cut” From the Fed

 

 

TLT hit a three-month low as investors braced for what could be the Fed’s final cut for a while.



 

 

 

 

 [![sumit](/sites/default/files/styles/author_image_icon/public/2023-03/Sumit_0.png?itok=SO-7S5SH "sumit")](/authors/sumit-roy) 

[By Sumit Roy ](/authors/sumit-roy)

 Dec 08, 2025

 Edited by: ETF.com Staff

 

 

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Bond ETFs started the week on the back foot as investors positioned ahead of Wednesday’s FOMC meeting. The [**iShares 20+ Year Treasury Bond ETF (TLT)**](/tlt) fell to its lowest level in three months, even with futures markets assigning an 89% probability that the Federal Reserve will cut rates by 25 basis points.  
  
TLT, one of the most interest rate-sensitive ETFs on the market, is now up 4.7% year-to-date, down from its October peak, when gains approached 9%.

## Markets Expect a “Last Cut” Tone

The Fed cut rates twice earlier this year, and a move on Wednesday would mark the third. What’s unsettled markets isn’t the cut itself, but what comes after it. Traders increasingly expect the Fed to pause once the policy rate drops into the 3.5–3.75% range, especially with inflation still above target and the labor market holding steady.  
  
That has raised the possibility of a “hawkish cut,” where the Fed lowers rates, but pairs the move with guidance that the bar for further easing is high. The policy rate is already well off last year’s 5.25–5.50% highs.

 
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## Long Bonds Under Pressure

Bond yields and prices move inversely, and TLT tracks the long end of the curve, where yields have risen sharply. The 30-year Treasury yield traded near 4.81% to start the week, up from October’s lows around 4.5%.  
  
![](/sites/default/files/inline-images/30yr.png)  
  
Unlike the front end of the curve, the 30-year is the least tethered to the Fed’s policy rate. Larger fiscal deficits and shifting inflation expectations have played a bigger role in driving long-bond weakness.  
  
Short-term yields remain far more responsive to Fed policy. The 2-year Treasury last traded near 3.58%, slightly below the effective fed funds rate and barely changed in recent weeks. While long bonds sold off, the front end has been stable.  
  
The 10-year Treasury sits in the middle. After bottoming near 4% recently, it has climbed to about 4.17%, its highest level since September but still well below the January highs near 4.8%.

The [**iShares 7–10 Year Treasury Bond ETF (IEF)**](/ief) is up 7.8% year-to-date, outpacing both TLT and the [**iShares 1–3 Year Treasury Bond ETF (SHY)**](/shy), which is up 4.6%.  
  
The sweet spot has been intermediate-term duration, which participated in the rate-driven gains earlier in the year while sidestepping the sharpest part of the recent sell-off in long bonds.



 

 

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 [ Sumit Roy Senior ETF Analyst ](/authors/sumit-roy) 

 

 

  Sumit Roy is the senior ETF analyst for etf.com and author of (Don't) Invest Like a Pro. He creates a variety of content for the platform, including…   [View Bio](/authors/sumit-roy)

 



 

 


 Related Topics  [Fixed Income](http://www.etf.com/topics/fixed-income) 

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