The yield on the 30-year US Treasury rose as high as 5.613% intraday on Sept. 29 (US time), the highest since 2002. The 10-year yield traded at 5.264% the same day. Korean investors bought about KRW 5.3861 trillion of US Treasuries in July-September, the most for any quarter since records began in 2011 (Korea Securities Depository).
Yet individuals who bought US long-term bond ETFs (exchange-traded funds, funds that trade like stocks) lost money. TLT, the flagship ETF holding US Treasuries with more than 20 years left to maturity (run by BlackRock, the world's largest asset manager), lost 7.54% this year through Sept. 29, even including its distributions (the interest the fund pays out). Its distributions over the past year came to 4.97% of its price, close to '5% interest,' but they did not prevent the loss.
Rising Treasury yields mean the prices of Treasuries already issued fall, and the longer the maturity, the bigger the drop.
- The 5% interest belongs to whoever buys today
The US Securities and Exchange Commission (SEC, the US market regulator) explains a general principle of bonds in its investor bulletin on corporate bonds. If market interest rates rise from 3% to 4%, a bond paying 3% has to compete with new bonds paying 4%, so its price tends to fall. Interest rates and bond prices move in opposite directions, like the two ends of a seesaw. The same bulletin notes that the longer the maturity, the more time rates have to change, so interest rate risk is generally greater.
That is why results split even among US Treasury ETFs. SGOV (BlackRock's ultra-short Treasury ETF), which holds only Treasuries maturing in 0-3 months, rose 2.70% over the same period, distributions included.
- Duration turns the length of maturity into a number
The key is duration (a measure, in years, of how much a bond's price swings when rates change). Generally, when rates move 1 percentage point, a bond's price moves about 1% in the opposite direction for each year of duration. As of Sept. 29, TLT's duration was 14.74 years and SGOV's was 0.11 years.
Roughly, that means when rates rise 1 percentage point, TLT falls about 14.7% and SGOV about 0.1%. Dividing TLT's 4.97% yearly distribution by its duration of 14.74 gives about 0.34 percentage points (BITPRESS calculation). If long-term rates rise just that much within a year, a year's worth of interest is wiped out by the price drop.
Actual rates rose by more than that. The 30-year yield climbed from 4.97% on July 1 to 5.56% on Sept. 28, up 0.59 percentage points in three months, more than the roughly 0.34 points. That said, the 20- to 30-year bonds TLT holds don't move exactly like the 30-year bond, and TLT's loss this year (-7.54%) is measured from January, so the periods differ.
- Individuals were said to be buying the dip, but prices fell further
According to Koscom ETF Check, individuals net-bought KRW 17.1 billion of 'ACE US 30-Year Treasury Active' (an ETF listed in Korea that holds 30-year US Treasuries) from July 28 to Aug. 28, the most of any bond ETF. Over the same period, this ETF fell 8.09% and hit a 52-week low on Aug. 28. The Financial News read the buying as bottom-fishing by investors expecting rates to fall back.
Rates kept rising after that. According to The Korea Economic Daily, 'RISE US 30-Year Treasury Active,' a similar product to ACE, closed at KRW 7,955 on Sept. 29, down about 7.2% from the end of August (based on price excluding distributions; ACE's performance over the same period could not be confirmed).
Anyone who bought US-listed ETFs in dollars also has to weigh the exchange rate. The won-dollar rate fell about 5.7%, from 1,441.8 won per dollar on Jan. 2 to 1,359.4 won on the morning of Sept. 29. Someone who bought at the start of the year gets that much less when converting back to won (because the dates differ, we did not add this to TLT's loss).
- In September, Korean investors' top net buy switched to an ultra-short Treasury ETF
According to Korea Securities Depository data reported by The Financial News, Korean investors' net purchases of SGOV (settlement basis) came to $152.79 million from Sept. 1 to 14, the most of any US security. In August it ranked ninth. Because this counts a different group from the ACE figure above, which covers only individuals, it can't be read as the same money moving.
On interest alone, it is the lower payer. As of Sept. 29, the 30-day SEC yield (the last 30 days of interest income converted to a yearly rate) was 3.67% for SGOV and 5.49% for TLT. But because SGOV's duration is 0.11 years, rates would have to rise by more than 33 percentage points to erase its 3.69% yearly distribution (BITPRESS rough calculation).
As reasons for the rise in rates, Samsung Securities analyst Jeong Seong-tae cited the artificial intelligence (AI) investment boom, high oil prices from a prolonged war in the Middle East and widening fiscal deficits, among others.
- The same scene played out in 2023
In 2023, Korean retail investors in US stocks (nicknamed 'Seohak ants') net-bought about $920 million of TMF (a leveraged ETF that tracks three times the daily move in prices of US Treasuries with more than 20 years to maturity) from January through Sept. 22, making it their top overseas stock purchase. TMF fell to $5.20 on Sept. 21, down more than 35% from $8.03 at the start of the year, and TLT was also down 18% from the start of the year.
When rates changed direction, long bonds swung hard the other way. According to Newspim, as rates fell from their peak in April 2024 through September, TLT rose 11%, while the intermediate-term bond ETF IEF (7- to 10-year Treasuries) and the short-term bond ETF SHY (1- to 3-year) gained only 5% and 3%. Duration magnifies gains, too.
There are counterexamples. According to the same report, after the Fed (the US central bank) cut its policy rate in September 2024, economic data hinting at persistent inflation triggered a bond sell-off, and TLT fell about 7% for a time. The report explains that the Fed sets the rate on overnight loans between banks, while 20- to 30-year yields are set by the market, reflecting its outlook for growth, inflation and government finances.
- BITPRESS Insight
'5% interest' is the number for someone who buys today and holds to maturity. As the SEC bulletin says, an individual bond held to maturity pays the promised interest and principal (barring issuer default). TLT, by contrast, is a fund managed to hold Treasuries with more than 20 years left to maturity, so when rates rise its price falls in line with its duration, and it does not make up the loss by returning principal at maturity.
That makes a long-term bond ETF both a product that pays interest and one that rides heavily on the direction of long-term rates. If rates rise further, the price drop can outweigh the interest. The test is a single division: if long-term rates rise within a year by more than the yearly interest divided by duration, you lose money even after collecting the interest. As of Sept. 29, that is about 0.34 percentage points for TLT and about 33 percentage points for SGOV.
Sources
https://biz.heraldcorp.com/article/10889122
https://www.hankyung.com/article/2026093056341
https://www.ishares.com/us/products/239454/ishares-20-year-treasury-bond-etf
https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf
https://www.sec.gov/files/ib_corporatebonds.pdf
https://www.fnnews.com/news/202609151815159479
https://www.fnnews.com/news/202608301758549629
https://news.nate.com/view/20260611n28256
https://www.sedaily.com/article/13768256
Glossary
Duration — A measure, in years, of roughly how many % a bond's price moves in the opposite direction when rates change 1 percentage point; the longer it is, the more rates shake the price (for example, 14.74 years means about 14.7%).
Distributions — Money an ETF pays its investors from the interest and other income it receives on the bonds it holds.
30-day SEC yield — A fund's interest income over the last 30 days, converted to a yearly rate and calculated under US rules.
Net buying — The amount bought minus the amount sold over a period; a positive number means more money went into buying than selling.
Leveraged ETF — An ETF built to track two or three times the daily move of its underlying index, so losses are multiplied by the same factor.
ACE and RISE US 30-Year Treasury Active — ETFs listed in Korea that invest in 30-year US Treasuries and trade in won, a local counterpart to a US long-bond ETF like TLT.
Seohak ants — Korean slang for Korean retail investors who buy US and other overseas stocks; 'ants' is the local nickname for small individual investors.
Korea Securities Depository — Korea's central securities depository, which records Korean investors' overseas stock and bond settlements and publishes how much they bought and sold.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
