Bloomberg Analyst Warns Against Chasing Treasury Fund Bargains After $7 Billion Inflow

Bloomberg's Eric Balchunas warned investors to avoid buying the iShares 20+ Year Treasury Bond ETF (TLT) despite $7 billion pouring into the fund as it declined, noting that TLT has fallen 36% over five years while the S&P 500 gained 90%. Balchunas acknowledged his own historical attempts to catch falling "bargain" stocks mostly fell further, admitting that opportunistic dip-buying is harder than it appears. His experience demonstrates the risk of chasing depreciated assets based on valuation metrics alone.

Treasury bond funds have experienced significant outflows of investor capital in recent months as interest rates climbed substantially. The 10-year Treasury yield jumped nearly 80 basis points between July and late September, causing pronounced declines in long-duration bond prices. This dynamic has created a seemingly paradoxical situation where retail investors continue adding money to struggling funds, potentially hoping to capitalize on depressed valuations.

Balchunas's broader concern extends beyond TLT itself. He noted that traditional bond ETFs have lost their historical role as portfolio stabilizers during stock market downturns, now rising in response to equity declines only 40% of the time compared to 90% historically. This structural shift may force investors to reconsider conventional portfolio construction principles that have dominated retirement and long-term savings strategies.