Seeking Alpha Recommendation: Long-Duration Treasuries Amid Yield Curve and Fed Policy Dynamics

This analysis is based on a December 15, 2025 Seeking Alpha article [1] recommending long-duration U.S. Treasuries. The article argues long-term yields have reached cycle peaks and will decline following short-term rates amid yield curve normalization.

The iShares 20+ Year Treasury Bond ETF (TLT) has faced short-term challenges: over 30 days ending December 15, 2025, it dropped 2.48% from $89.62 to $87.40, with average daily volume of 32.54M shares [0]. This aligns with the article’s observation of near-term pain for early long-duration investors due to lagging long-rate declines.

Yield curve dynamics drive the outlook: the curve has steepened, with the 10-year Treasury yield at ~4.19% as of December 15, 2025 [2]. This steepening follows three 25-basis-point Fed rate cuts in 2025 (September, October, December) totaling 75 bps [3][4][5]. While short-term rates fell in response to Fed policy, long-term rates lagged, causing the yield curve to steepen amid global short-term rate declines [6].

Fed guidance adds complexity: Chair Jerome Powell signaled a possible pause in rate cuts after the December 2025 meeting [7], though markets still price in two rate cuts in 2026 [5]. Historical precedent shows inverted yield curves typically normalize as long rates follow short rates lower, especially as economic cycles slow [8].

1. Timing Mismatch
   : The yield curve normalization process may take longer than expected, as evidenced by TLT’s recent decline. Early investors face near-term losses even if the medium-term outlook aligns with the article’s prediction.
2. Policy Uncertainty
   : Contrasting signals from the Fed (potential pause) and market expectations (2026 rate cuts) create volatility risk for long-duration bonds.
3. Historical Context
   : While historical patterns support yield curve normalization, current conditions (e.g., the Fed’s “near neutral” policy stance [5]) may not perfectly replicate past cycles.

• Risks
  :
  • Inflation resurgence could force the Fed to reverse course and tighten rates, pushing long-term yields higher.
  • Stronger-than-expected economic growth may reduce demand for safe-haven Treasuries, negatively impacting TLT.
  • The timing of long-rate declines is uncertain, potentially prolonging losses for holders.
• Opportunities
  :
  • If long-term yields fall as predicted, TLT could generate significant capital gains.
  • Long-duration Treasuries may offer diversification benefits in investment portfolios.

• TLT declined 2.48% over 30 days ending December 15, 2025, with volume of 32.54M shares [0].
• The Fed implemented three 25-bps rate cuts in 2025 but signaled a potential pause [3][4][5][7].
• The 10-year Treasury yield was ~4.19% as of December 15, 2025 [2].
• Historical patterns show long rates typically follow short rates lower during yield curve normalization [8].
• Markets price two 2026 Fed rate cuts, contrasting with the Fed’s pause signal [5].