US Treasury ETF hits 20-year low amid rising interest rates

A prominent US Treasury ETF has fallen to its lowest level in over 20 years, driven by US interest rates approaching 5 percent. This decline highlights the significant pressure rising rates are placing on the bond market, as bond prices move inversely to yields.

Financial institutions, including BlackRock, Morgan Stanley, and ING, warn that high long-term bond yields could become a major market shock. Analysts suggest that the cost of capital may remain structurally high due to rising real interest rates, large public deficits, and massive capital requirements for infrastructure, energy, and AI.

This environment poses risks beyond the bond market, potentially impacting equity valuations—particularly for growth and technology stocks—as well as housing and corporate finances. Investors are increasingly demanding higher returns to commit funds to long-term obligations, creating intense competition for capital.