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The latest moves by President Donald Trump triggered an upside in the fixed income space. This is especially true as Trump will wait until November 2020 elections to strike a deal. With no deal this year, the additional U.S. tariffs on Chinese goods effective Dec 15 is looming large (read: Volatility ETFs Higher on Trump's Threats, Weak Data).
Additionally, Trump is planning to restore tariffs on steel and aluminum imports from Brazil and Argentina in retaliation to currency devaluations. The administration also proposed tariffs of up to 100% on $2.4 billion worth of French products including sparkling wine, cheese and other goods to penalize France for a new digital services tax that hugely hit U.S. technology companies.
This affected the U.S. Treasury yields, raising demand for the safe-haven bonds in turn, especially the long-dated ones. Notably, the 10-year U.S. Treasury yields tumbled due to the biggest one-day drop since Aug 1 while the 30-year yields saw the biggest one-day plunge since Jun 27, 2016.
As a matter of fact, long-term Treasury bond ETFs rose on Dec 3 and will likely continue with the trend at least in the near term. Below, we have profiled five ETFs, surging the most on the current turmoil. These funds have a Zacks ETF Rank #4 (Sell) (see: all Government Bond ETFs here).
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) — Up 2.8%
This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 21 securities in its basket. Both effective maturity and effective duration of the fund are 27.30 years. This fund has a decent level of $279.8 million in AUM and a light average daily volume of 44,000 shares. It charges 15 bps in annual fees.
This fund provides exposure to the long-term Treasury STRIPS market by tracking the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. It holds 81 bonds in total with average maturity of 25.1 years and average duration of 24.2 years. Expense ratio comes in at 0.07%. The product has amassed $1.1 billion in its asset base and has a moderate volume of 180,000 shares per day on average.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) — Up 2.1%
This is the most popular and liquid ETF in the long-dated bond space with AUM of more than $17.8 billion and average daily volume of 10.8 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 37 securities in its basket. The fund has average maturity of 25.57 years and effective duration of 18.12 years. It charges 15 bps in fees per year (read: Stocks Set for a Strong 2020? Top-Ranked ETFs to Pick).
Vanguard Long-Term Government Bond ETF (VGLT - Free Report) — Up 2%
With AUM of $1.5 billion, this fund follows the Bloomberg Barclays U.S. Long Government Float Adjusted Index. It holds 52 bonds in its basket with average maturity of 25.4 years and average duration of 17.8 years. The ETF trades in a good volume of around 333,000 shares and has 0.07% expense ratio (read: 2 Sectors & Their ETFs Are Hot Picks for 2020).
This fund tracks the Bloomberg Barclays Long U.S. Treasury Index, charging investors 6 bps in annual fees. It holds 58 bonds in its basket with average maturity of 24.98 years and adjusted duration of 18.27 years. SPTL is one of the popular choices in the long-term Treasury space with AUM of $1.8 billion and average daily volume of 1 million shares.
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Treasury ETFs Rally on Trade Gyrations
The latest moves by President Donald Trump triggered an upside in the fixed income space. This is especially true as Trump will wait until November 2020 elections to strike a deal. With no deal this year, the additional U.S. tariffs on Chinese goods effective Dec 15 is looming large (read: Volatility ETFs Higher on Trump's Threats, Weak Data).
Additionally, Trump is planning to restore tariffs on steel and aluminum imports from Brazil and Argentina in retaliation to currency devaluations. The administration also proposed tariffs of up to 100% on $2.4 billion worth of French products including sparkling wine, cheese and other goods to penalize France for a new digital services tax that hugely hit U.S. technology companies.
This affected the U.S. Treasury yields, raising demand for the safe-haven bonds in turn, especially the long-dated ones. Notably, the 10-year U.S. Treasury yields tumbled due to the biggest one-day drop since Aug 1 while the 30-year yields saw the biggest one-day plunge since Jun 27, 2016.
As a matter of fact, long-term Treasury bond ETFs rose on Dec 3 and will likely continue with the trend at least in the near term. Below, we have profiled five ETFs, surging the most on the current turmoil. These funds have a Zacks ETF Rank #4 (Sell) (see: all Government Bond ETFs here).
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) — Up 2.8%
This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 21 securities in its basket. Both effective maturity and effective duration of the fund are 27.30 years. This fund has a decent level of $279.8 million in AUM and a light average daily volume of 44,000 shares. It charges 15 bps in annual fees.
Vanguard Extended Duration Treasury ETF (EDV - Free Report) — Up 2.7%
This fund provides exposure to the long-term Treasury STRIPS market by tracking the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. It holds 81 bonds in total with average maturity of 25.1 years and average duration of 24.2 years. Expense ratio comes in at 0.07%. The product has amassed $1.1 billion in its asset base and has a moderate volume of 180,000 shares per day on average.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) — Up 2.1%
This is the most popular and liquid ETF in the long-dated bond space with AUM of more than $17.8 billion and average daily volume of 10.8 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 37 securities in its basket. The fund has average maturity of 25.57 years and effective duration of 18.12 years. It charges 15 bps in fees per year (read: Stocks Set for a Strong 2020? Top-Ranked ETFs to Pick).
Vanguard Long-Term Government Bond ETF (VGLT - Free Report) — Up 2%
With AUM of $1.5 billion, this fund follows the Bloomberg Barclays U.S. Long Government Float Adjusted Index. It holds 52 bonds in its basket with average maturity of 25.4 years and average duration of 17.8 years. The ETF trades in a good volume of around 333,000 shares and has 0.07% expense ratio (read: 2 Sectors & Their ETFs Are Hot Picks for 2020).
SPDR Portfolio Long-Term Treasury ETF (SPTL - Free Report) — Up 1.9%
This fund tracks the Bloomberg Barclays Long U.S. Treasury Index, charging investors 6 bps in annual fees. It holds 58 bonds in its basket with average maturity of 24.98 years and adjusted duration of 18.27 years. SPTL is one of the popular choices in the long-term Treasury space with AUM of $1.8 billion and average daily volume of 1 million shares.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>