After months of decline, Treasuries are back in favor, logging in the best week in a year as inflation fears eased. The 10-year yields dropped to 1.43%, the lowest level since early March, thus shrugging off the hot inflation data, which showed that the core consumer price index rose 5% year over year in May, the highest level since 2008 (read:
Core Inflation at 29-Year High: 6 ETF Areas to Benefit). This is because the Fed viewed inflation as a temporary given the reopening of the economy and lower readings in the year-ago period. The central bank is currently buying at least $120 billion of bonds each month and kept the benchmark short-term rates near zero. As millions of Americans are now fully vaccinated and the pandemic restrictions are being relaxed, the U.S. economy is on a strong recovery path and is leading to a spike in inflation. Additionally, short positions in Treasuries hit their highest last week since 2018, per the latest JP Morgan data. The unwinding hasflattened the yield curve and this short-covering drove the bond rally. As such, Treasury ETFs gained last week. We highlighted five of those that led the way higher. These have unfavorable Zacks ETF Rank #4 (Sell) or 5 (Strong Sell) (see: all Government Bond ETFs here): PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF ( ZROZ Quick Quote ZROZ - Free Report) — Up 2.5% This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 22 securities in its basket. Both effective maturity and the effective duration of the fund are 27.28 years. This fund has a decent level of $355.3 million in AUM and a light average daily volume of 56,000 shares. It charges 15 bps in annual fees. iShares 25+ Year Treasury STRIPS Bond ETF ( GOVZ Quick Quote GOVZ - Free Report) — Up 2.5% This fund offers exposure to U.S. principal STRIPS (Separate Trading of Registered Interest and Principal Securities) with remaining maturities of at least 25 years. It tracks the ICE BofA Long US Treasury Principal STRIPS Index, holding 14 bonds in its basket. The fund has average maturity of 27.28 years and an effective duration of 26.97 years. It has amassed $387 million in its asset base and charges 7 bps in fees per year. GOVZ trades in average daily volume of 410,000 shares (read: 3 ETFs to Protect Against Inflation). Vanguard Extended Duration Treasury ETF ( EDV Quick Quote EDV - Free Report) — Up 2.1% 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 80 bonds with average maturity of 24.7 years and average duration of 24.4 years. Expense ratio comes in at 0.07%. The product has an AUM of $1 billion and sees a good volume of 258,000 shares per day, on average. iShares 20+ Year Treasury Bond ETF ( TLT Quick Quote TLT - Free Report) — Up 1.7% This is the most popular and liquid ETF in the long-dated bond space with an AUM of $13.4 billion and average daily volume of 12.1 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 34 securities in its basket. The fund has average maturity of 26.28 years and an effective duration of 18.81 years. It charges 15 bps in fees per year. SPDR Portfolio Long-Term Treasury ETF ( SPTL Quick Quote SPTL - Free Report) — Up 1.6% This fund tracks the Bloomberg Barclays Long U.S. Treasury Index, charging investors 6 bps in annual fees. It holds 67 bonds in its basket with average maturity of 24.33 years and an adjusted duration of 18.83 years. SPTL is one of the popular choices in the long term Treasury space with an AUM of $3.6 billion and average daily volume of 1.8 million shares. Want key ETF info delivered straight to your inbox?
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