Quick Read
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TLT trades at $79.46, just above its $76.43 52-week low, with markets pricing only a 20% chance of an October hike.
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Bank of America expects a Fed hike, citing core PCE potentially ending 2026 at 3.4%, well above the 2% target.
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Either outcome October 28 carries price risk for TLT: a surprise hike shocks markets, while a hold could signal a less hawkish Fed and lift long yields.
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In a note on Monday, Bank of America (NYSE:BAC) said it still expects the Federal Reserve to raise rates at its October meeting. The decision is due Wednesday, October 28. Bank of America put the market-implied chance of that hike at just 20%, so its call is clearly a minority view.
Long-dated Treasuries fell the same day. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) traded at $79.46 late Monday, down 0.74% from Friday’s $80.05 close.
That leaves the fund much closer to its 52-week low of $76.43 than to its high of $92.19. It is down 5.65% year to date and 8.82% over one year.
If a major bank is right and markets are wrong, the most rate-sensitive mainstream bond fund has not yet priced in that risk. A bank forecast is still just a house view, and the Fed has decided nothing. If you hold TLT for income, you need to watch the gap between the forecast and market pricing ahead of the decision.
Inside Bank of America’s Case for a Hike
The bank wrote that “September inflation bolsters the case for an October hike” and that “the inflation picture has gotten worse since the Sep meeting.”
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Bank of America said core PCE inflation, the Fed’s preferred gauge, could probably end the year at 3.4%, well above the 2% target. Its reasoning is that a booming nominal economy makes it easier for an energy shock to pass through to consumer prices.
Bank of America noted that most FOMC members backed two hikes this year. It asked why the second shouldn’t come in October, which would keep a December move possible. After a September increase, the upper bound of the Fed’s target range already stands at 4.00%.
