MW Long-term Treasury bonds rally as investors dump stocks in broad-based selloff

By Christine Idzelis

The U.S. bond market is up so far this year, unlike the S&P 500

The U.S. bond market is increasing its gains this year as stocks come under pressure.

Long-term Treasurys had their best day in months on Thursday, as investors looked for safety in the bond market amid a broad selloff in U.S. equities.

The Vanguard Long-Term Treasury ETF VGLT, an exchange-traded fund whose portfolio of U.S. Treasury bonds maintains an average maturity of 10 to 25 years, jumped 1.2% on Thursday for its biggest rally since October, according to FactSet data. And the iShares 20+ Year Treasury Bond ETF TLT gained 1.3%, leaving the popular fund with its largest jump since October as well.

The U.S. bond market rose Thursday amid a selloff in stocks that saw the S&P 500 tally its biggest drop since Jan. 20, with the index's information-technology sector XX:SP500.45 deepening its losses this year, FactSet data showed. Bonds cushioned some of the blow for traditional portfolios suffering equity-market declines amid the recent market volatility.

The U.S. stock market fell Thursday, with the Dow Jones Industrial Average DJIA falling 1.3%, the S&P 500 slumping 1.6% and the tech-heavy Nasdaq Composite dropping 2%. The Roundhill Magnificent Seven ETF MAGS, which holds Big Tech stocks, declined an even larger 2.3%, driven by sharp losses in shares of companies like Apple Inc. $(AAPL)$ on Thursday.

Investors appeared to seek shelter from the stock-market storm in the fixed-income market.

When investors pile into bonds, the rise in their prices send yields lower. Treasury yields were broadly falling on Thursday, but particularly for longer-term securities. The closely watched 10-year Treasury yield BX:TMUBMUSD10Y dropped 7.8 basis points on Thursday to its lowest level since early December based on 3 p.m. Eastern time levels, according to Dow Jones Market Data.

The U.S. bond market is broadly up so far in 2026, with long-term Treasurys outperforming, according to FactSet data.

The iShares 20+ Treasury Bond ETF has gained at total of 2.8% this year through Thursday - exceeding the iShares Core U.S. Aggregate Bond ETF's AGG 1.1% total return over the same stretch. Meanwhile, the S&P 500 erased its 2026 gains on Thursday, ending the session with a year-to-date loss of 0.2%.

Beyond worries in the stock market over disruption from artificial intelligence and Big Tech falling out favor after potentially excessive enthusiasm surrounding AI, investors are paying close attention to the U.S. economic calendar. Wednesday's U.S. employment report showed jobs growth in January was stronger than Wall Street expected but also included downward revisions for 2025 that left some investors worried about weakness in the labor market.

The stronger-than-forecast jobs growth in January spurred bond-market investors to readjust their expectations surrounding interest-rate expectations, with traders in the federal funds futures market pricing an even greater probability of the Federal Reserve keeping its benchmark rate steady in the months ahead. Fed funds futures on Thursday indicated that the Fed may resume cutting as soon as June, with two potential rate cuts from the central bank in 2026, according to the CME FedWatch Tool, at last check.

The market may be "underpricing the amount of rate cuts we're going to get" in the next year "because I think the labor market is weaker" than the headline data on January jobs growth suggested, Andrew Szczurowski, portfolio manager for strategic income at Morgan Stanley Investment Management, said in an interview.

He said that he expects that the Fed's rate cuts this year are going to be "heavily backloaded" and that inflation will become less of a worry for the central bank next year. Investors will get a fresh reading on U.S. inflation on Friday from the consumer-price index.

While inflation has been stuck above the Fed's 2% target, Szczurowski said that he expects the pass-through from tariffs will have been digested about a year from now, making it easier for the Fed to cut rates.

He added that he likes owning duration along the Treasury market yield curve that is essentially controlled by the Fed, meaning he is favoring shorter-term to intermediate Treasurys out to five years as he expects the Fed will continue cutting rates.

-Christine Idzelis

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February 12, 2026 17:42 ET (22:42 GMT)

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