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Treasury ETFs Rise on Slowdown Concerns, Lower Yields
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Treasuries gained momentum this year on declining yields. A host of factors like jobs reports, easing inflation, and recession fears are pushing yields lower, thereby providing an upside to the Treasury market.
Investors could ride this opportune moment by investing in Treasury ETFs. While most of the funds in the space are rallying, PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , Vanguard Extended Duration Treasury ETF (EDV - Free Report) , BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) and iShares 20+ Year Treasury Bond ETF (TLT - Free Report) are leading the way higher.
Inflation in the United States unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June. The annual inflation growth was the smallest rise since October 2021. The data put the Federal Reserve on track to again slow the pace of interest-rate hikes.
Meanwhile, a moderation in wage increases and a decline in U.S. services activity in December signal a slowdown in the U.S. economy and also buoyed hopes of a less hawkish stance from the Fed. Additionally, U.S. retail sales fell the most in a year in December, signaling weaker consumer spending and a slower growth path for the overall economy heading into 2023. Treasuries are safer investments during economic downturns (read: Bond ETFs That Have Gained Investors' Love to Start 2023).
The International Monetary Fund warned that a third of the global economy would be in a recession given no signs of abatement of the ongoing conflict in Ukraine, spiraling inflation, higher interest rates and a surge in coronavirus infections in China. The year 2023 would be "tougher" than last year as the United States, European Union and China may see their economies slow down.
Let’s delve deeper into the above-mentioned ETFs:
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 12.9%
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF offers exposure to the long end of the yield curve. It follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 24 securities in its basket. Both effective maturity and the effective duration of the fund are 26.67 years and 26.72 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $862 million in AUM and an average daily volume of 294,000 shares. It charges 15 bps in annual fees and has a Zacks ETF Rank #4 (Sell).
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 12.8%
iShares 25+ Year Treasury STRIPS Bond ETF 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 22 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.40 years and an effective duration of 26.91 years (read: Will 2023 Be the "Best Year" for Bond ETFs in 14 Years?).
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $344.5 million in its asset base and charges 15 bps in fees per year. GOVZ trades in an average daily volume of 109,000 shares.
Vanguard Extended Duration Treasury ETF provides exposure to the long-term Treasury STRIPS market by tracking the Bloomberg U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. It holds 80 bonds with an average maturity of 24.7 years and an average duration of 24.3 years. Expense ratio comes in at 0.06%.
Vanguard Extended Duration Treasury ETF has an AUM of $1.6 billion and sees a good volume of 319,000 shares per day, on average. It has a Zacks ETF Rank #4.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 10%
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF provides exposure to U.S. Treasury securities that have an average duration of approximately 20 years. It follows the Bloomberg US Treasury Twenty Year Duration Index and holds 19 bonds in its basket. Average maturity comes in at 27.48 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $26 million in its asset base since its inception in September. It trades in an average daily volume of 3,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 9.1%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It holds 34 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.61 years and an effective duration of 17.64 years (read: Should You Buy Bond ETFs Now?).
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $31 billion and an average daily volume of 20 million shares. iShares 20+ Year Treasury Bond ETF has a Zacks ETF Rank #4 with a High risk outlook.
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Treasury ETFs Rise on Slowdown Concerns, Lower Yields
Treasuries gained momentum this year on declining yields. A host of factors like jobs reports, easing inflation, and recession fears are pushing yields lower, thereby providing an upside to the Treasury market.
Investors could ride this opportune moment by investing in Treasury ETFs. While most of the funds in the space are rallying, PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , Vanguard Extended Duration Treasury ETF (EDV - Free Report) , BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) and iShares 20+ Year Treasury Bond ETF (TLT - Free Report) are leading the way higher.
Inflation in the United States unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June. The annual inflation growth was the smallest rise since October 2021. The data put the Federal Reserve on track to again slow the pace of interest-rate hikes.
Meanwhile, a moderation in wage increases and a decline in U.S. services activity in December signal a slowdown in the U.S. economy and also buoyed hopes of a less hawkish stance from the Fed. Additionally, U.S. retail sales fell the most in a year in December, signaling weaker consumer spending and a slower growth path for the overall economy heading into 2023. Treasuries are safer investments during economic downturns (read: Bond ETFs That Have Gained Investors' Love to Start 2023).
The International Monetary Fund warned that a third of the global economy would be in a recession given no signs of abatement of the ongoing conflict in Ukraine, spiraling inflation, higher interest rates and a surge in coronavirus infections in China. The year 2023 would be "tougher" than last year as the United States, European Union and China may see their economies slow down.
Let’s delve deeper into the above-mentioned ETFs:
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 12.9%
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF offers exposure to the long end of the yield curve. It follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 24 securities in its basket. Both effective maturity and the effective duration of the fund are 26.67 years and 26.72 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $862 million in AUM and an average daily volume of 294,000 shares. It charges 15 bps in annual fees and has a Zacks ETF Rank #4 (Sell).
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 12.8%
iShares 25+ Year Treasury STRIPS Bond ETF 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 22 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.40 years and an effective duration of 26.91 years (read: Will 2023 Be the "Best Year" for Bond ETFs in 14 Years?).
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $344.5 million in its asset base and charges 15 bps in fees per year. GOVZ trades in an average daily volume of 109,000 shares.
Vanguard Extended Duration Treasury ETF (EDV - Free Report) — Up 12.1%
Vanguard Extended Duration Treasury ETF provides exposure to the long-term Treasury STRIPS market by tracking the Bloomberg U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. It holds 80 bonds with an average maturity of 24.7 years and an average duration of 24.3 years. Expense ratio comes in at 0.06%.
Vanguard Extended Duration Treasury ETF has an AUM of $1.6 billion and sees a good volume of 319,000 shares per day, on average. It has a Zacks ETF Rank #4.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 10%
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF provides exposure to U.S. Treasury securities that have an average duration of approximately 20 years. It follows the Bloomberg US Treasury Twenty Year Duration Index and holds 19 bonds in its basket. Average maturity comes in at 27.48 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $26 million in its asset base since its inception in September. It trades in an average daily volume of 3,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 9.1%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It holds 34 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.61 years and an effective duration of 17.64 years (read: Should You Buy Bond ETFs Now?).
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $31 billion and an average daily volume of 20 million shares. iShares 20+ Year Treasury Bond ETF has a Zacks ETF Rank #4 with a High risk outlook.