Michael Burry has put long-duration Treasury bonds back in the spotlight, warning that a combination of AI-driven debt expansion, rising inflation volatility, elevated oil prices and mounting stress in the Treasury basis trade could keep upward pressure on long-term yields — a challenging backdrop for long-duration bond ETFs.
In a post on X, the investor urged investors to “watch the long bonds,” arguing that Treasuries are being squeezed by “AI’s debt explosion,” rising inflation volatility and a weakening basis trade, while adding that oil’s climb back toward $100 further complicates the outlook.
The warning comes as U.S. 30-year Treasury yields have already spent 27 trading days above the 5% mark in 2026, compared with just six days in 2025 and seven days in 2023, according to Bloomberg data. The only recent year with a longer stretch was 2007, when yields remained above 5% for 50 trading days.
Long-Duration Treasury ETFs in Focus
Persistently high long-term yields typically weigh on bond prices, making long-duration Treasury ETFs particularly vulnerable because of their higher interest-rate sensitivity.
Among the largest funds exposed to the long end of the Treasury curve are:
iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT)
Vanguard Long-Term Treasury ETF (NASDAQ:VGLT)
SPDR Portfolio Long Term Treasury ETF (NYSE:SPTL)
Vanguard Extended Duration Treasury ETF (NYSE:EDV)
These funds have long durations, meaning even modest increases in long-term yields can translate into meaningful price declines.
Why the Basis Trade Matters
Burry also flagged the Treasury basis trade — a popular hedge fund strategy that seeks to profit from price differences between cash Treasuries and Treasury futures.
According to Morgan Stanley, the estimated size of leveraged funds’ cash-futures basis trade has fallen from roughly $1.3 trillion to around $1 trillion over recent months as trading opportunities have diminished.
While the shrinking trade may reduce leverage in the system, any disorderly unwinding could amplify volatility in the Treasury market, creating additional headwinds for long-duration bond funds.
AI Spending Adds Another Layer of Risk
Burry’s reference to an “AI debt explosion” points to the unprecedented capital spending by technology giants to build AI infrastructure.
Massive investments in data centers, semiconductor capacity and power infrastructure have increased financing needs across both the private and public sectors. At the same time, elevated fiscal deficits continue to boost Treasury issuance, contributing to higher long-term borrowing costs.
If inflation remains sticky — particularly with crude oil prices approaching the $100-a-barrel mark — the Federal Reserve may have less room to ease policy aggressively, potentially keeping long-end yields elevated.
Which ETFs Could Benefit?
While long-duration Treasury ETFs face pressure in a higher-for-longer rate environment, investors seeking to reduce interest-rate risk may look toward shorter-duration or inflation-linked fixed-income funds.
Short-duration Treasury ETFs such as iShares 0-3 Month Treasury Bond ETF (NYSE:SGOV) and Vanguard Short-Term Treasury ETF (NASDAQ:VGSH) tend to be less sensitive to rising yields, while Treasury Inflation-Protected Securities (TIPS) funds like the iShares TIPS Bond ETF (NYSE:TIP) and Schwab U.S. TIPS ETF (NYSE:SCHP) may benefit if inflation expectations continue to rise.
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