TLT’s Rare Billion Dollar Outflow Day

$1.1b was pulled from the popular fund Oct. 27, barely denting this year’s $20b haul.

Investors pulled $1.1 billion from BlackRock Inc.’s TLT in a single day last week, a rare outflow for the biggest treasury bond ETF that’s brought in more than $20 billion this year. 

The outflow was the biggest since December for the iShares 20+ Year Treasury Bond ETF. The redemptions came after $3.63 billion was brought in over the previous 10 days, and on a day when trading volume dipped 15% below average.  

Market uncertainty and recession fears appear reflected in TLT pulling in $20.1 billion this year while still falling 13% in price. The fund, which captures the far end of the Treasury curve, is particularly sensitive to long-term interest rate movements. As 30-year treasury yield reached about 5%, the fund’s shares have continued to plummet. 

“There are multiple things happening [with TLT inflows],” said Salim Ramji, Global Head of iShares and Index Investments at BlackRock at Bloomberg’s Future of Fixed Income event on Oct. 26. “I think what happened is that institutional buyers were able to see again, the financial instrument dynamics that TLT exhibit and the rich options ecosystem around TLT as well,” he said. 

Despite the fund having lost half of its value from its peak in 2020, its haul this year is the most of any fixed income ETF. 

Large investors trading the fund are likely responsible for the hefty outflows, said etf.com analyst Sumit Roy. “TLT has attracted a lot of interest among investors, both big and small, and some of them are in it for the long haul, while others are trading in and out all the time,” he said.  

TLT Leaves Investors Perplexed 

While the large inflows paired with poor performance may seem counterintuitive, the explanation is likely a combination of people looking to buy the dip and institutional investors rebalancing their portfolios, experts said.  

Technical traders are also responsible for the volatile inflows and outflows since many are buying at price support levels, according to Kent Thune, Research Lead at etf.com.  

“Traders buy at or near the support level and sell at the resistance level,” Thune explained. 

Since the most recent resistance level was at a price of about $84.50, traders avoiding remaining in the position long term were likely locking in gains and exiting the fund on Oct. 27. “Also, Fridays are notorious for low trading volume, so the selloff wasn't seen as high conviction,” he added.  

On the heels of a strong jobs report, all eyes are on the Federal Reserve this week. Whether or not the Fed will keep interests high will be a large factor in how investors bet on TLT next.  

Contact Lucy Brewster at [email protected].