[Edaily Reporter KIM YOON-JEONG ] As long-term U.S. Treasury yields continue to soar, the slump in U.S. Treasury exchange-traded funds (ETFs) listed on the domestic stock market is deepening. Contrary to investors’ expectations of rising bond prices due to falling interest rates, major U.S. long-term bond ETFs have fallen by 5–6% over the past month, and when the period is extended to six months, some products have posted losses exceeding 15%. Concerns among long-term bond investors are deepening as the U.S. budget deficit, the burden of Treasury supply, and the renewed possibility of interest rate hikes by the Federal Reserve (Fed) have all come back into focus.

◇ 30-Year ETF Loses Over 15% in 6 Months… Larger Drop Than 10-Year Bond
According to the Korea Exchange on the 2nd, based on the day’s closing price, the “RISE U.S. 30-Year Treasury Covered Call (Synthetic)” fell 6.28% over the past month. The “SOL U.S. 30-Year Treasury Covered Call (Synthetic)” also fell 5.95%, and the “ACE U.S. 30-Year Treasury Active” (-5.50%), “PLUS U.S. 30-Year Treasury Active” (-5.27%), and “RISE U.S. 30-Year Treasury Active” (-5.22%) all posted losses as well.
10-year ETFs also fell by around 5% over the same period. The “ACE U.S. 10-Year Treasury Active” fell 5.29%, the “TIGER U.S. 10-Year Treasury Futures” fell 5.14%, and the “KODEX U.S. 10-Year Treasury Futures” fell 4.98%.
When the time frame is extended to six months, the underperformance of 30-year bonds becomes even more pronounced. The “ACE U.S. 30-Year Treasury Active (JPY Exposure) (H)” fell 15.51%, while the “RISE U.S. 30-Year Treasury Active” (-14.87%), “SOL U.S. 30-Year Treasury Covered Call (Synthetic)” (-14.66%), and “RISE U.S. 30-Year Treasury Covered Call (Synthetic)” (-14.53%) also fell by more than 14%. In contrast, the decline in 10-year ETFs was relatively modest, ranging from 7% to 8%.
U.S. Treasury ETFs, which had hit 52-week lows the previous day, continued their downward trend today. The “ACE U.S. 30-Year Treasury Active” closed at 8,770 won, down 0.45% from the previous trading day, and the “RISE U.S. 30-Year Treasury Active” also closed at 8,445 won, down 0.41%. The “PLUS U.S. 30-Year Treasury Active” closed at 47,120 won, down 0.38%, while the “RISE U.S. 30-Year Treasury Covered Call (Synthetic)” closed at 7,765 won, down 0.58%.
Long-term U.S. Treasury yields also remain at elevated levels. The yield on the 10-year U.S. Treasury note closed at 4.796% on the 1st (local time) and surged as high as 4.812% during the session. The 30-year yield closed at 5.267% and rose as high as 5.290% during the session. Previously, on the 18th of last month, the 30-year yield surged to 5.337% during the session, hitting a 19-year high—the highest level since 2007.
Because bonds pay a fixed interest rate, their appeal diminishes and their prices fall when market interest rates rise. In particular, the longer the maturity of a bond, the greater its duration—its sensitivity to interest rate fluctuations—and thus the larger the valuation loss when rates rise.
◇Concerns Over Interest Rate Hikes Amid Fiscal Burden and Treasury Supply… “Wait-and-See Approach Until Employment Data Is Confirmed”
Behind the rise in long-term Treasury yields lie the U.S. budget deficit and the burden of Treasury supply. The U.S. Treasury Department estimated net borrowing of marketable Treasuries at $739 billion for the third quarter of this year and $628 billion for the fourth quarter. Rising international oil prices due to instability in the Middle East and inflationary pressures are also heightening uncertainty surrounding interest rates.
In addition, the possibility of a Fed rate hike has come back into focus following the Jackson Hole meeting. As Fed Chairman Kevin Warsh expressed a strong commitment to price stability, the Fed’s benchmark interest rate forecast reflected in the Overnight Index Swap (OIS) rose by more than 10 basis points (1 bp = 0.01 percentage point) compared to the day before the Jackson Hole meeting, once again exceeding 4%.
Ahn Jae-kyun, an analyst at Korea Investment & Securities, noted, “Even though a hawkish message was delivered at the Jackson Hole meeting, if expected inflation does not decline, there is a possibility that this could lead to an actual rate hike.” Given that short-term interest rate expectations have already risen to nearly 4%, he predicted that the scope for further increases in the U.S. 10-year yield would be more limited than that for short-term yields. Analyst Ahn suggested, “Rather than buying long-term Treasuries immediately, a wait-and-see approach until the employment data is released later this week is the more advantageous strategy.”