🚨US government bonds are rallying

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20-year+ Treasuries ETF, $TLT, has risen 6% year-to-date and has outperformed stocks.

As a result, the S&P 500 ETF, $SPY, to $TLT ratio hit the lowest level since December.

This has been largely driven by the series of economic data coming in below expectations in the US.

Moreover, call options volume (bullish bets) on the 20+ year Treasury Bond ETF, $TLT, spiked to nearly 1.1 million on Tuesday.

This is 3 times more than at the start of 2024.

Is this a bull market in long-term government bonds in the making or they are acting more like a save haven as in the previous US recessions? It will not be a surprise if the rally continues when the economic weakness becomes even more apparent.

Besides, there have been some rumors that potentially Europe will be spending trillions on defense which may eventually help to lower deficits for the US in the coming years (presumably relieving the US of defense spending burden), resulting in a smaller issuance of long-term government bonds

For now, I am very skeptical about Europe huge defense spending considering what they have done (not much with some exceptions) in the past in this matter.

Lastly, weak data has been also behind the market pricing of the rate cuts. Expectations are now for 2 rate cuts in 2025, up from just 1 seen a few weeks ago.

More about the recent US economic data in the recent market recap:

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