TLT Jumps as Rate Cuts Predicted for 2024

TLT Jumps as Rate Cuts Predicted for 2024

TLT investors celebrate cooling inflation and eye potential rate cuts by mid-2024.

Research Lead
Reviewed by: Staff
Edited by: Mark Nacinovich

The proverbial knife has stopped falling and long-term bond ETF investors believe the only cuts coming will be in the form of lower interest rates in 2024. 

The iShares 20+ Year Treasury Bond ETF (TLT) jumped 2.5% on Tuesday’s news of cooling inflation reflected in the Consumer Price Index for October. 

Have TLT investors finally seen the end of the worst bond bear market in history? 

TLT, the long-term bond market proxy, fell more than 50% in price over the past three years as yields have sharply risen amid the Federal Reserve’s aggressive rate-hike campaign and the highest inflation in 40 years. 

Because bonds with longer maturities are more rate sensitive than those with shorter maturities and because bond prices have an inverse relationship with yields, long-term bond ETFs can be attractive to investors who expect yields to fall.

TLT's Record Inflows Amid Price Declines in 2023

This risky trade reached a fever pitch in 2023 as TLT attracted record inflows even as yields continued to climb.  

The seemingly foolish behavior had some market observers wondering if TLT investors were attempting to “catch a falling knife,” an expression referring to an investor who buys a stock after a big price drop, expecting the price will rebound, but the price continues to fall. 

TLT investors now appear to have their eyes on 2024, when they expect a slowing economy could bring rate cuts and higher bond prices. 

TLT’s Potential Price Gain Calculation

TLT investors are betting that they will be rewarded for taking interest rate risk now in exchange for outsized returns when rates fall again. To measure a bond ETF’s interest rate sensitivity, an investor can multiply the average duration of the ETF’s bond holdings by the expected change in interest rates.  

For example, TLT’s average duration is about 16 years. A 100-basis point decline in rates would translate into a 16% gain in price for TLT. Conversely, a 100-basis point increase in rates would translate into a 16% decline in price, which helps to explain the massive losses in TLT as rates increased at a record pace. 

TLT Investors Eye 2024 Rate Cut Prediction 

The odds of the Fed keeping rates unchanged at its next policy meeting in December are now at 99.8%, as measured by the CME FedWatch Tool. This highly watched tool, which measures rate expectations based on the effective federal-funds rates futures contracts, now predicts over 80% odds of a rate cut ranging between 25 to 75 basis points by June 2024. 

While it’s arguably premature for TLT investors to claim victory on their risky bet that the long-term Treasury bond proxy’s price has bottomed out, the historic trade certainly looks less foolish today than many believed just one month ago as TLT is 7.0% above its October low. With downside price risk appearing to be limited, and upside potential higher, the TLT price wager appears to be more attractive to some investors. 

Another way to explain 2023’s discrepancy between what TLT investors see and what Fed observers see is that the Fed looks backward at data while the bond market is a forward-looking mechanism. While Fed observers note that the U.S. economy grew at a blistering rate of 4.9% in the third quarter, TLT investors see estimated growth ahead of 2.2% in the fourth quarter and 1.8% in 2024. That suggests that the Fed may be finished raising rates, yields have peaked and TLT could have more room to run. 

While the direction of the economy and interest rates is unknown, the only thing that is certain about the short-term future is that TLT investors will continue to disagree with the “higher-for-longer” crowd.

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.