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$iShares 20+ Year Treasury Bond ETF(TLT)$

The 20-Year Treasury Crossed 5%—Should You Wait for 6%?

Welcome back, I hope you're healthy and well. Tonight update, we’re diving into a key milestone in the bond market: the 20-year Treasury bond crossed the 5% threshold this past Wednesday morning "Should we buy at 5% or wait for treasuries to hit 6%?"

With that in mind, here’s what we’ll cover in today’s update:

1. Which Treasuries Crossed 5% This Week and Why We'll also address whether waiting for 6% makes sense and how we handled cash parked in T-bills and money market funds.

2. Weekly Movements in Treasury Yields A breakdown of which Treasuries rose and which fell over the past week.

3. Next Week's Treasury Auctions and Current Yield Opportunities An overview of the highest-yielding options across new-issue agencies, corporate bonds, and brokered CDs.

Which Treasuries Crossed 5%, and Should You Wait for 6%?

Longer-dated Treasury yields have been steadily climbing since last year. In the first seven trading days of this year alone, yields on maturities of two years and beyond rose by double-digit basis points compared to December 31. Two primary factors contributed:

• Sticky Inflation: Concerns over persistent inflation exceeding the Fed’s target and the potential for inflationary policies.

• Federal Reserve Signals: Indications that the Fed might slow the pace of rate cuts.

These factors pushed the 20-year Treasury yield above 5% on Wednesday, though it briefly dipped back into the high 4% range before ending the week above 5% following a strong jobs report.

The Bureau of Labor Statistics revealed that December’s non-farm payrolls rose by 256,000, significantly exceeding the forecast of 155,000. The unemployment rate fell slightly to 4.1%, providing the Fed with justification to keep rates stable—or even consider another hike. This report also drove the 30-year Treasury yield briefly above 5%, though it closed just below that level.

So, should you wait for 6% Treasuries?

The last time longer-dated Treasury yields exceeded 5% was in October 2023. Many have been waiting for this moment to return. While 6% yields are possible, they might not arrive soon, and if you’re near or in retirement, waiting could misalign with your timeline.

For those already dollar-cost averaging, this 5% opportunity may be a chance to increase allocations slightly. Personally, I expect the TLT to drop further If I were in retirement, I might have allocated even more.

With the yield curve normalizing, parking cash in short-term T-bills or money markets earning less seems less appealing. Locking in a guaranteed 5%+ yield for 20 years allows me to pursue higher-yielding, slightly riskier equity positions with other portfolio funds.

That said, everyone’s financial journey is unique. Are you increasing your Treasury purchases with the recent yield spike? Or are you holding out for higher rates? Share your approach in the comments.

Weekly Treasury Yield Movements

As usual, let’s compare this week’s Treasury yield data to last week’s. Using the Treasury's Daily Par Yield Curve Rates, we see that yields increased across nearly all maturities:

• Increases in rates are shown in black.

• Decreases are marked in red.

Longer-dated Treasuries saw the biggest gains, while shorter maturities experienced smaller movements.

Upcoming Auctions and Yield Opportunities

Next week features auctions for the 20-year T-note and 10-year . We’ll also highlight opportunities in agencies, corporates, and brokered CDs offering attractive yields.

A Look at Treasury Yields and What’s Ahead

Last week, Treasury yields for maturities of two years and longer rose by double-digit basis points, driven by the factors we discussed earlier: the blowout jobs report, inflation concerns, and expectations for a slower pace of Fed rate cuts in 2025.

Above 5% Yield on the 20-Year Treasury

The 20-year Treasury bond maintained a yield above 5% last week, marking a significant milestone. Meanwhile, shorter maturities like the two-month Treasury remained unchanged, and the one-month Treasury yield declined slightly by two basis points.

Typically, we compare current Treasury yields to those from the previous week. However, since it’s the beginning of the year, let’s take a broader view. Here’s how yields from this past Friday compare to the same day one year ago:

• Current Yields vs. One Year Ago

  Yields for all maturities of two years and longer have risen noticeably over the past year, with the biggest increases at the long end (7-, 10-, 20-, and 30-year maturities).Conversely, yields for maturities of one year and under have declined, with the steepest drops in the 1- to 6-month T-bills. This reflects the Fed’s rate cuts on the short end last year.

• The Yield Curve Has Turned Positive

  The yield curve, which had been inverted for much of last year, is now positive. For instance, the difference between the one-month and 30-year yields stands at +54 basis points (up from +38 basis points a week ago and -133 basis points a year ago).The widely watched 2-year vs. 10-year Treasury spread is now at +37 basis points (compared to +32 basis points a week ago and -33 basis points a year ago).

For more details on these rates, visit the Treasury’s Daily Par Yield Curve Rates page.

Upcoming Treasury Auctions and Opportunities

Looking ahead, the Treasury auction schedule is relatively quiet aside from the usual weekly T-bill and CMV auctions. For those interested in other fixed-income opportunities, here’s a snapshot of the highest-yielding new issues:

1. Agency Bonds

   Federal Home Loan Banks: 6.3% yield (first call date: April 2025).QP number provided in the video for further details.

2. Corporate Bonds

   Deutsche Bank: 6.05% yield (first call date: January 2026).Detailed QPs available in our recent video on top corporate bonds.

3. Brokered CDs

   Regions Bank: 4.6% yield (first call date: July 2025).

If you’ve come across particularly attractive rates on bank CDs or high-yield savings accounts, please share them in the comments for the community.

TLT ETF

The recent decline in the TLT ETF price can be attributed to several factors:

1. Economic Outlook: Stronger-than-expected economic data has fueled expectations of a potential pause in Federal Reserve rate cuts or even future rate hikes, both of which negatively impact bond prices.

2. Market Sentiment: Shifts in investor sentiment, such as increased risk aversion or concerns about economic growth, can create selling pressure on bond ETFs like TLT.

3. Tariff Policies: President-elect Donald Trump's campaign promises, including tariffs on China and Mexico, could lead to higher inflation by increasing the cost of imported goods.

4. Tax Cuts: Proposed tax cuts aimed at stimulating economic growth by increasing disposable income and business investment may also contribute to higher inflation as greater economic activity puts upward pressure on prices.

It's essential to remember that bond prices and yields move inversely. As bond yields rise, bond prices typically fall. Therefore, persistent inflation, along with expectations of a rate pause or future rate hikes, can significantly contribute to the decline in TLT's price.

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