Tastylive: How Pros Are Trading a Collapsing Bond Market

At the height of the pandemic in 2020, investors panicked. They moved so much money into bonds that 10-Year yields hit an all-time low of 0.3 percent. Today, that yield is closer to 4.6 percent.

Overall, the bond market has dropped nearly 46 percent over the past three years. It’s one of the largest bond market drops in history. The past few weeks alone saw a meltdown that pushed the drop to levels seen in the stock market in 2008.

With big moves like that, it’s no surprise that traders may want to take advantage of moves in that market.

One way to do that is with the iShares 20+ Year Treasury Bond ETF (TLT). The ETF owns bonds with a duration of over 20 years. Long-dated bonds see the biggest swings from changes in interest rates.

Recently, investors have been taking a long position on the ETF. They expect shares to move out of their three-year bear market and make at least some move higher.

From a technical perspective, that makes sense. Last week’s bond market selloff created heavily oversold conditions. In a way, changes in interest rates mimic the move of implied volatility in the stock market.

It’s possible shares start to trend higher in the months ahead. The market’s big swing lower is now priced for a reversal.

To watch the full analysis and how to trade moves in interest rates, click here.