The Vanguard Long-Term Treasury ETF (VGLT) stock price is still collapsing as concerns about America’s fiscal health continues. Like the iShares 20+ Year Treasury Bond ETF (TLT), the VGLT has plunged to $52, the lowest level since January 2014. it has fallen by over 45% from the highest level on record.
Warning about long-term TreasuriesThe plot is thickening for America’s fiscal situation as budget deficits widen. The most recent data shows that the country’s public debt has surged to more than $33.6 trillion. It has risen by over $600 billion in a few weeks.
Sadly, the situation will continue getting worse in the coming months. For one, President Biden is requesting over $100 billion in cash to fund Ukraine, China, and Taiwan. The government has also seen its budget deficit surge to almost $2 trillion.
The Treasury yield curve will soon normalize at higher rates across the curve. Short-term yields will move from 5.5% to 6%. Long-term yields will move from 5% to 7% – 8%. Given an abnormally large amount of debt, the U.S. economy can't afford a normal yield curve. QE coming soon.
— Peter Schiff (@PeterSchiff) October 19, 2023The US problem is solvable but politicians will not be prepared to do the right thing. It needs to radically reduce its spending and raise taxes gradually. Defense spending has jumped to over $820 billion a year, higher than the next ten countries combined.
The US also needs to address other non-discretionary spending like Medicare and Social Security. Unless this happens, these funds will run out in the next few years, which will worsen the situation.
The US can also raise its corporate taxes and seal the numerous loopholes that exist. For example, it can raise its corporate tax rate from 21% to say 25% (in par with China) and lower than European countries. The challenge is that these measures cannot pass in Congress.
Therefore, the challenge is where the US will continue requiring more debt at a time when the biggest buyers are selling. As a result, domestic buyers will require more interest to hold this debt. Worse, the regular debt ceiling issues, there is a likelihood that the US will lose the last Triple-A bond rating.
Good Morning Everyone! China dumps U.S. stocks and bonds!
The most in FOUR years.
Over $21.2B SOLD in August
Mostly treasuries and bonds, but wait… China also UNLOADS a record $5.1B in U.S stocks
Their U.S treasury holdings now the lowest since 2009😲 pic.twitter.com/05Xy6NK8I8
Investors are still allocating capital to the Vanguard Long-Term Treasury ETF. Data by ETF.com shows that the fund has attracted over $368 million so far this month, higher than last month’s $195 million. In all, the fund has attracted over $4.1 billion from investors this year alone.
It is not alone. The TLT ETF has also seen over $1.7 billion in inflows this year. Inflows rose to over $644 million this month, lower than the previous month’s $1.5 billion.
Turning to the weekly chart, we see that the Vanguard Long-Term Treasury ETF has been in a strong downward trend. It recently dropped below the important support at $55.47, the lowest swing in 2022. It has remained below all moving averages.
Also, it has formed an inverted cup and handle pattern, pointing to more downside as sellers target the key support at $50.
Watch here: https://www.youtube.com/embed/MSJWUbr08kE?feature=oembedThe post VGLT ETF is still seeing inflows as Treasuries plot thickens appeared first on Invezz.
