The Peak in U.S. Treasury Yields – a 2024 Event?

U.S. Treasury Yields Are Near Year-to-Date Highs

U.S. Treasury yields are near their year-to-date and cycle highs, close to the highest yield levels observed since prior to the onset of the Great Financial Crisis in 2007. These higher yields have occurred amid resilient economic conditions, declining yet persistent inflation and the fastest Federal Reserve tightening cycle in close to 20 years (Figure 1).

Prior to the Fed’s September meeting, the central bank’s dot-plot projections showed peak rates by year end 2023. Dot-plot projections reflect what each U.S. central banker thinks will be the appropriate midpoint of the fed-funds rate at the end of each calendar year. At the Sept. 20 meeting, the Fed signaled that not only could it raise rates again, but also that it may make fewer rate cuts in 2024.

Many investors now foresee the peak in U.S. interest rates as more likely a 2024 event. U.S. Treasury markets have been experiencing significant volatility since investors have come to terms with the reality of a higher-for-longer rate environment. The volatility in U.S. Treasuries has also been because of safe-haven demand for U.S. government bonds amid the Israel-Hamas conflict.

Figure 1. Federal Funds Target Rate

Source: The Federal Reserve, as of 9/23/2023

What May Be Ahead for U.S. Treasury Yields

At BondBloxx, our view is that elevated yields in U.S. Treasuries are here to stay for a while and the peak in rates may now occur in 2024. These higher U.S. Treasury yields have increased the attractiveness of this fixed-income asset class to investors, after several years of near zero percent rates. With the recent performance fluctuations and continued volatility expected in U.S. Treasury rates, we believe there are a number of different strategies investors can consider along the yield curve to capitalize on the current environment.

Figure 2. Bloomberg U.S. Treasury Target Duration Indices – Yield-to-Maturity

Source: Bloomberg, as of 9/30/2023.

3 Investment Ideas for Portfolios

• Attractive income potential for short-term investments. Investors looking for a short-term investment strategy to generate higher income, manage cash positions and maintain liquidity should consider shorter-duration BondBloxx U.S. Treasury ETFs like the BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF).  
   
• Navigate interest rate changes. Investors navigating the potential of the Fed being at or near the end of its rate hiking cycle may consider going slightly longer on the duration curve with the BondBloxx Bloomberg Five Year Target Duration US Treasury ETF (XFIV).  
   
• Manage your portfolio duration. Investors seeking to extend out on the yield curve to manage portfolio duration or who anticipate that Fed policy may pivot can consider the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN). 

For more information about investing in U.S. Treasuries with precise, low cost BondBloxx U.S. Treasury ETFs, visit bondbloxxetf.com.

Disclosure 
Carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information can be found in the Funds’ prospectus or, if available, the summary prospectus, which may be obtained by visiting www.bondbloxxetf.com. Read the prospectus carefully before investing.

There are risks associated with investing, including possible loss of principal. Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. Fixed income investments are also subject to credit risk, the risk that the issuer of a bond will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. Investing in mortgage- and asset -backed securities involves interest rate, credit, valuation, extension and liquidity risks and the risk that payments on the underlying assets are delayed, prepaid, subordinated or defaulted on.

Distributor: Foreside Fund Services, LLC.

BondBloxx Investment Management Corporation (“BondBloxx”) is a registered investment adviser. Registration with the SEC as an investment adviser does not imply a certain level of skill or training. The content of this presentation is intended to be for informational purposes only and is not intended to be investment advice. Not for distribution to the public. Nothing contained in this presentation constitutes investment, legal, tax, accounting, regulatory, or other advice. Information contained in this presentation does not constitute an offer to sell or a solicitation of an offer to buy any shares of any BondBloxx ETFs. The investments and strategies discussed may not be suitable for all investors and are not obligations of BondBloxx.

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