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ETFs that track treasuries have risen despite the fact that the global economy has stabilized since 2008 and interest rates have risen (from near 0 to ~1.5%) My (very simplistic) understanding of treasury prices is that as interest rates rise, treasury bond prices decline. If this is the case, what might have contributed to the rise of an ETF like TLT (which tracks treasury prices)?

  • It's a small technicality but the yield on a treasuries rises and falls because of the price change of the treasury, not vice versa. – Bob Baerker Oct 28 '19 at 11:30
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I'm not sure where you're getting your information. I used Yahoo Finance to plot the price of TLT (your long-term treasury bond ETF) against the yield on 30-year treasury bonds. The two charts are nearly perfect mirror images of each other, showing that as interest rates rise, the price of the bond ETF falls, and vice versa.

So, it looks like it's not the case that treasury prices have risen despite increasing interest rates.

A chart showing the price of a treasury bond ETF, TLT, against a treasury bond yield index, TYX. The chart shows that as TLT rises, TYX falls, and vice versa.

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    Wasn't the federal interest rate 0% in 2008? And now it's not 0%, so didn't it rise? (Please forgive me if I'm misunderstanding something) – user3586940 Oct 28 '19 at 7:17
  • @user3586940 Well, the federal funds rate is a very short-term rate (overnight), while TLT holds long-term bonds (20 to 30 years). So it's no surprise that the yield of TLT doesn't reflect the federal funds rate. So, I decided to look at a short-term treasury bond fund, SHV. The yield of SHV does reflect the federal funds rate pretty well. However, the price of SHV essentially remains constant instead of reflecting the federal funds rate; this is because short-term bond prices are less sensitive to interest rate changes than long-term bond prices are. – Tanner Swett Oct 28 '19 at 7:50
  • I gave you best answer and upvoted, but it is your awesome comment that answered my question. I would add it to the answer. – user3586940 Oct 28 '19 at 8:00

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