‘Widow Maker' Bond-ETF Trade Delivers Fast Gains for Dip-Buyers
(Bloomberg) -- Dip buyers in the dangerous world of long-dated Treasury debt are enjoying a rare pay day — and fast.
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Investors over the past week poured $1.8 billion into BlackRock Inc.'s iShares 20+ Year Treasury Bond ETF (ticker TLT) — the most among all the 630 ETFs that Bloomberg tracks — just as longer-maturity government bonds sold off on fears over America's debt trajectory.
The timing has proved fortuitous. In Tuesday trading, Treasuries rallied — pushing the 30-year yield below 5% — on optimism about trade negotiations between the US and the European Union, and as Japan signaled it may adjust debt sales to stabilize its bond market. TLT jumped 1.7% during the session, on track for its biggest daily rise since February.
It's a rare win for an ETF trade that has earned a reputation as a so-called widow maker. True to its infamy, TLT has attracted some $49 billion in the past five years despite shedding more than 40% in that time horizon.
'Investors aren't letting TLT's widow-maker reputation scare them off,' said Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence. 'They're still buying in, holding on to hope that long-term Treasuries will finally bounce back.'
For some time, bond investors have been demanding extra compensation for the risk of investing in longer-duration debt as Republican lawmakers haggled over President Donald Trump's signature tax-cut bill that would add trillions of dollars to already bulging budget gaps. Benchmark 30-year Treasury bonds surged above 5.1% last week to trade near the highest in almost two decades.
But last week's buying streak in TLT suggests that a growing cohort of traders are betting that yields are high enough to entice buyers and compensate for the risks. Long-maturity bonds are most exposed to interest-rate risk, so they tend to rally the most when borrowing costs fall.
'Dip-buyers are trying to pick the bottom,' and long-term bonds give investors 'the biggest bang for your buck' because they are exposed to the most volatile part of the yield curve, said Byron Anderson, head of fixed income at Laffer Tengler Investments Inc.
The iShares 10-20 Year Treasury Bond ETF (TLH) was also among the ETFs that attracted the most inflows over the past week, along with the iShares 0-3 Month Treasury Bond ETF (SGOV).
Peter Tchir of Academy Securities is among those recommending long-bonds, saying the pessimism is overdone. Adding heft to his belief is the rally in global bonds after Japanese authorities signaled they are considering adjusting their debt plan.
'The situation wasn't as bad as the narrative,' said Tchir who recommended investors add duration last week. 'Positioning had swung from too bullish to too bearish fairly quickly, too.'
Of course, TLT — which is almost as volatile as US stocks — isn't for faint hearts. In the options market, traders remain wary of further declines in long bonds. It costs more to buy put options in TLT than to purchase calls, a sign there is demand for downside protection.
'We believe the long end will continue to see term premium increase,' said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management. 'It's all about the fiscal, what is the right level to lend at to countries whose balance sheets are trending the way they are.'
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On X, his social media platform, one user said Isaacman's removal was a 'gut punch for the space agency,' to which Musk responded with a '100' emoji, indicating he agreed 100%. 'At Great Personal Cost' The fissure caps a roller-coaster 11 months from Musk's endorsement of Trump in July of 2024. Musk spent hundreds of millions of dollars to elect Trump and Republicans in 2024, and when the once and future president defeated Kamala Harris in November's election, he turned to Musk to lead an effort to slash the size and scope of government. Musk scythed through the federal bureaucracy while Trump unleashed a flurry of executive actions, each seeking to dismantle the administrative state at what the White House came to call 'Trump speed.' Yet swift progress on conservative priorities came with a price tag for Musk, who has seen his own net worth plummet in part because of reputational tarnish at home and abroad from his political actions and affiliation with Trump. Musk's net worth — much of it tied to the performance of Tesla — has dropped an estimated $64.1 billion so far this year, according to data compiled by Bloomberg Billionaires Index. It's the largest on-paper loss of any of the world's 500 richest people. And now, on his top political focus point of deficit reduction, any success Musk can claim — achieved, in his own words, 'at great personal cost and risk' — may be drowned out by the president's own signature legislation. The Congressional Budget Office projected that the House-passed tax and spending bill at the center of Trump's legislative agenda would add more than $2.4 trillion to US budget deficits over the next 10 years, slashing revenues by $3.67 trillion while only cutting spending by $1.25 trillion. That's way above even DOGE's most optimistic savings estimates. Its government website listing estimated savings states that DOGE has saved taxpayers about $180 billion year-to-date. However its 'Wall of Receipts' — a line-by-line list of contracts, grants and leases canceled since Inauguration Day — only accounts for less than half of that number. Adding to the risk for Musk's bottom line, Trump's bill would wipe out some valuable tax incentives that bolster his own companies. Musk personally appealed to House Speaker Mike Johnson to save tax credits for electric vehicles, according to a person familiar with the matter, but ultimately lost that fight. In an interview with Bloomberg Television on Thursday, Johnson did not confirm whether Musk had approached him over the credits, but said the two would speak later in the day, adding that Musk seems 'pretty dug in right now, and I can't quite understand the motivation behind it.' Musk's criticism of the spending package built slowly. On Tuesday, however, Musk lashed out, posting on his social media platform, X, that the bill was 'pork-filled' and 'a disgusting abomination.' Adding insult to injury for the White House, Musk has embraced the very argument that the administration has been trying to combat, noting the bill would significantly widen the federal budget deficit. By Wednesday afternoon, Musk was posting about 'debt slavery' and sharing an image of Uma Thurman holding a samurai sword — the poster for the film 'Kill Bill.' Widening Rift The rift between the two billionaire showmen — each renowned for seeking out the spotlight, and not for sharing it — had seemed to be widening for a while. Even as Musk embraced his DOGE role and continued making periodic appearances at the White House, he broke with some of Trump's policies. Musk has criticized tariffs, the primary tool in Trump's economic agenda, but one that has shown the potential for massive disruption in markets Musk moves in, including those for batteries critical to the fate of Tesla's automotive and energy units. An outside Trump adviser said the president remained furious about an incident, reported by The New York Times, in which Musk angled to obtain a classified briefing from the Pentagon about the upshot of a war with China, where Musk has extensive economic interests, especially via Tesla. As public furor grew over DOGE's unilateral cuts to federal agencies, Trump publicly reined Musk in, asserting that cabinet officials would have final say over proposed reductions. In a May 20 appearance at the Qatar Economic Forum, Musk told Bloomberg's Mishal Husain he intended to pull back from political giving, only months after spending nearly $300 million to boost Trump's successful campaign for the White House. Sour Taste Behind the scenes, Musk's sojourn through the West Wing left a sour taste for some officials, according to the outside adviser and one person within the administration. The outside adviser particularly noted Musk's brusque treatment of Wiles, who managed Trump's victorious campaign before joining the administration. It was a longtime Wiles ally, Brian Hughes, who was sent to serve as NASA chief of staff, a position from which he could serve as a check in an agency that is central to SpaceX's fortunes. A senior White House official said Wiles and Musk had a cordial and collaborative relationship, and that the chief of staff met weekly with the tech entrepreneuer as he led DOGE. The official said Hughes had long wanted to work at NASA, and that his placement there was not an effort to keep tabs on Musk and SpaceX. A person familiar with SpaceX discounted the chance that bad blood between Musk and Trump would have an immediate negative effect on the company, because it has carved out such a dominant position in the launch business even as corporate rivals have struggled. But the person said there is frustration that the company's brand has been damaged, first with Democrats who were appalled by Musk's embrace of Trump and DOGE's tactics, and now with Trump supporters in Washington, who will likely side with the president over Musk. But Musk's time with Trump has already yielded benefits in other ways, said Myrow, especially in areas where the administration or DOGE pulled the plug on aspects of the regulatory state that had previously tangled with his companies. 'For Musk personally, the SEC stuff went away,' Myrow said, referring to Securities and Exchange Commission investigations. 'And he's long wanted to turn X into an 'everything app,' and now a lot of the regulations that would have inhibited that are going away.' --With assistance from Nancy Cook, Erik Wasson, Annmarie Hordern, Lisa Abramowicz, Michael Shepard and Derek Wallbank. 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