What is the TLT ? The iShares Barclays 20+ year Treasury Bond Fund is an exchange traded fund that seeks to track the Barclays US 20+ Year Treasury Bond Index. The Fund has 18 securities, some cash and 3+B in assets. It was born on July,22, 2002 and sports a 8.6% inception return. The Fund lost 21+% in the 2009 retreat from the abyss and had a whopping 33+% gain in 2011. The securities have an average effective duration of 17.63. The coupons range from 2.75 to 4.75. The market "pundocracy" and equity-centric celebrity day traders have anointed it "The Bond Market."
Thus, a plethora of chartists, fruit worshipers, hyperventilating former hedgies and JV Bill Gross wannabes see the fixed income universe in the easily digestible ort that is the TLT. In relation to the actual Bond Market, the TLT represents a not so impressive .00003658 % of the total. Here's the money shot : The Fund (or more directly its fickle investors and its psycho cousin the TBT) scares the heck out of us.
We spend much of our research time on the financialization of commodities and the socialization of credit. The equitizing of fixed income has now popped onto our radar. The long term obligations of your Uncle Sam aren't going to be the source of the next financial crisis despite the vocal hopes of many a Fed detractor. The exodus of the TLT renter class could cascade through fixed income with nasty results, however. Think of it as a pebble that causes a boulder sized ripple. We are watching and listening and on the look out for signs that the acronym doesn't stand for what happens to pinball machine systems when things start shaking.