Fixed-Income Investors Like What They See in TLH

If you want to know where the bond market is headed, look no further than fund flows, which are now telling us that fixed-income investors like what they see in the iShares 10-20 Year Treasury Bond ETF (TLH). 

Last month, TLH amassed more than $2.6 billion in assets, which is second only to the iShares 0-3 Month Treasury Bond ETF (SGOV), which attracted more than $3.3 billion. 

This time last month, TLH was nowhere to be found on our list of top fund flows, which can easily be found on etf.com’s Pulse Tool. 

What Fund Flows Tell Us

In short, the large and sudden increase in assets for TLH means that fixed-income investors are increasingly betting that the economy will continue to slow, and that they favor the 10-year Treasury for price appreciation potential, rather than the more rate-sensitive iShares 20+ Year Treasury Bond ETF (TLT). 

In stark contrast to TLH’s big inflows last month, TLT had nearly $3.8 billion in outflows. 

TLH Climbs Fixed Income ETF Flows Chart

Source: etf.com flows data as of March 7, 2025.

TLH vs. TLT: Finding the Middle Ground of Rate Sensitivity 

Both TLH and TLT invest in U.S. Treasury bonds, but they differ in duration and interest rate sensitivity. TLH holds bonds with maturities between 10 and 20 years, making it less sensitive to interest rate changes than TLT, which holds bonds with maturities exceeding 20 years. This means TLH experiences lower price volatility compared to TLT, especially in uncertain market conditions. 

Currently, investors are favoring TLH over TLT as the economy slows but inflation risks persist. With concerns about a potential recession and Federal Reserve rate cuts on the horizon, investors seek the safety of Treasuries but also seek the potential for price appreciation as bond prices have an inverse relationship with interest rates.  

However, inflation risks limit the appeal of ultra-long bonds like those in TLT, which are more vulnerable to rising inflation and unexpected rate hikes. Thus, TLH offers a balanced middle ground, providing defensive exposure to Treasuries, as well as potential for price appreciation should interest rates fall, while reducing the extreme duration risk associated with TLT.  

As a result, TLH has gained traction among investors looking for yield and stability without excessive interest rate risk in a volatile economic environment. 

For further reading, see our article, A Guide to the 10-Year Treasury Yield.