TLT Jumps 4% as Fed Plots Rate Cuts in 2024

The central bank’s “dot plot” projects 75 basis points of rate cuts next year.

Research Lead
Reviewed by: Staff
Edited by: Mark Nacinovich

The proxy for the long-term bond market, the iShares 20+ Year Treasury Bond ETF (TLT), jumped 2.4% Wednesday and continued to rise another 2% through midday trading Thursday in response to the Federal Reserve’s rate trajectory for 2024.  

At its final meeting of 2023, the Federal Open Market Committee, or FOMC, voted unanimously to keep its key policy rate unchanged at a range of 5.25% to 5.50%. It was the third consecutive meeting that the Fed held its policy rates after a 25 basis-point rate hike in July. The Fed’s decision had been widely expected.  

So, why did TLT and other long-term bond ETFs see such big gains when the market highly anticipated the rate pause decision? 

The piece of news that cheered the bond market was the Fed’s infamous “dot plot” that projects the path of policy rates in the future, indicating three 25 basis-point rate cuts in 2024, ending the year at 4.75%. 

What Is the Fed Dot Plot? 

The "dot plot" refers to a graphical representation of the Federal Reserve's policymakers' projections for the future path of interest rates. It is a part of the economic projections released by the FOMC during its quarterly meetings. The FOMC is the policy-making arm of the Federal Reserve. 

Here's how the dot plot works: 

  • Participants' projections: The dot plot presents the individual projections of each FOMC participant regarding the future fed-funds rate. Each participant (typically a Federal Reserve governor or president of a Federal Reserve Bank) marks his or her projections on the chart. 
  • Individual dots: Each dot on the plot represents the expected fed-funds rate by a specific FOMC participant for a particular year. The dots are not labeled with the names of the policymakers, but the color of the dot indicates the range of projections (e.g., green for low, yellow for moderate and blue for high). 
  • Central tendency and range: The FOMC also provides a summary of the "central tendency" and the "range" of the projections. The central tendency typically excludes the three highest and three lowest projections, providing a sense of consensus among FOMC participants. 
  • Policy guidance: The dot plot is closely watched by market participants, economists and investors because it provides insight into the future direction of monetary policy. If a majority of dots for a particular year are clustered around a certain level, it may indicate the FOMC's expected policy path. 
  • Changes over time: The dot plot is updated and released quarterly, reflecting the evolving views of FOMC participants based on economic data and conditions. Changes in the dot plot over time can signal shifts in the FOMC's outlook for interest rates. 

It's important to note that the dot plot represents individual projections and not a binding commitment to specific policy actions. Economic conditions can change, and actual policy decisions may deviate from the projections. The dot plot serves as a tool for communication and transparency, providing the public with information about the FOMC's expectations for future interest rates. 

Is the Bond Market Mispricing Rate Cuts in 2024? 

Investors should note that the bond market typically prices in expected rate cuts in advance. This means that bond funds like TLT may not have much room for more gains in 2024, depending on inflation and Fed policy. For example, since we called the bear market price bottom for TLT in October, the price of the long-term Treasury bond ETF has climbed nearly 20%.  

The average duration of the fund is 16.5 years, which suggests that the bond market may have already priced in at least 100 basis points of rate cuts (bond price increases tend to rise by an amount equal to duration for every 100 basis points that yields fall). The opposite is also true. Therefore, if the Fed doesn’t cut rates by at least 100 basis points in 2024, TLT may be near a peak now or even fall in price. 

Investors should keep in mind that interest rates and bond yields are difficult to forecast and bond prices can be influenced by more than just Fed policy. Investor sentiment and economic conditions are also major factors in bond price movements. 

Kent Thune is Research Lead for, focusing on educational content, thought leadership, content management and search engine optimization. Before joining, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 


Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 


Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.