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The world's largest bond market made a remarkable recovery in November after experiencing difficulties earlier in 2023. It is now on track for its best month since March. The Bloomberg US Treasury Index recently turned positive, driven by easing inflation and steady job growth, and triggered a rally that brought yields down from their highest levels in more than a decade.
While most of the ETFs in the Treasury space are surging, we have highlighted five that are leading the way higher this month. These are iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - 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) .
The 10-year yield is headed for its biggest monthly decline since March, primarily due to the expectation that the Fed is done with its interest rate hike cycle.
The latest round of data points has strengthened the idea that the Fed is done with rate hikes and could potentially start cutting them next year. Inflation and job growth slowed in October. The unemployment rate ticked higher as auto strikes weighed on the labor market last month. A continued high level of unfilled job openings and solid private sector balance sheets indicate a “soft” economic landing. According to the CME's FedWatch Tool, the market anticipates more than a 50% chance of a rate reduction of at least 25 bps by May (read: 5 ETFs Set to Gain as Inflation Cools Down).
Meanwhile, weaker-than-expected housing market data drove yields lower. New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month as higher mortgage rates reduced affordability. High home prices are also weighing on homebuying activity.
Further, uncertainty surrounding global economic growth and geopolitical tensions can lead investors to seek refuge in Treasury securities, which are perceived as safe-haven assets.
Let’s delve deeper into the abovementioned ETFs:
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 11.4%
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 25 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.29 years and an effective duration of 26.69 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $158.8 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 273,000 shares.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 11.4%
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 22 securities in its basket. The effective maturity and the effective duration of the fund are 27.46 years and 26.44 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.1 billion in AUM and an average daily volume of 472,000 shares. It charges 15 bps in annual fees (read: Time to Buy Leveraged Treasury Bond ETFs?).
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 81 bonds with an average maturity of 24.6 years and an average duration of 24.0 years. The expense ratio comes in at 0.06%.
Vanguard Extended Duration Treasury ETF has an AUM of $2.7 billion and sees a good volume of 689,000 shares per day, on average.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 8.7%
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 38 bonds in its basket. Average maturity comes in at 26.75 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $28 million in its asset base. It trades in an average daily volume of 6,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 7%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the IDC US Treasury 20+ Year Index. It holds 41 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.28 years and an effective duration of 16.47 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $44.6 billion and an average daily volume of 47.4 million shares.
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Treasury ETFs on Track for Best Month Since March
The world's largest bond market made a remarkable recovery in November after experiencing difficulties earlier in 2023. It is now on track for its best month since March. The Bloomberg US Treasury Index recently turned positive, driven by easing inflation and steady job growth, and triggered a rally that brought yields down from their highest levels in more than a decade.
While most of the ETFs in the Treasury space are surging, we have highlighted five that are leading the way higher this month. These are iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - 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) .
The 10-year yield is headed for its biggest monthly decline since March, primarily due to the expectation that the Fed is done with its interest rate hike cycle.
The latest round of data points has strengthened the idea that the Fed is done with rate hikes and could potentially start cutting them next year. Inflation and job growth slowed in October. The unemployment rate ticked higher as auto strikes weighed on the labor market last month. A continued high level of unfilled job openings and solid private sector balance sheets indicate a “soft” economic landing. According to the CME's FedWatch Tool, the market anticipates more than a 50% chance of a rate reduction of at least 25 bps by May (read: 5 ETFs Set to Gain as Inflation Cools Down).
Meanwhile, weaker-than-expected housing market data drove yields lower. New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month as higher mortgage rates reduced affordability. High home prices are also weighing on homebuying activity.
Further, uncertainty surrounding global economic growth and geopolitical tensions can lead investors to seek refuge in Treasury securities, which are perceived as safe-haven assets.
Let’s delve deeper into the abovementioned ETFs:
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 11.4%
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 25 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.29 years and an effective duration of 26.69 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $158.8 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 273,000 shares.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 11.4%
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 22 securities in its basket. The effective maturity and the effective duration of the fund are 27.46 years and 26.44 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.1 billion in AUM and an average daily volume of 472,000 shares. It charges 15 bps in annual fees (read: Time to Buy Leveraged Treasury Bond ETFs?).
Vanguard Extended Duration Treasury ETF (EDV - Free Report) — Up 10.3%
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 81 bonds with an average maturity of 24.6 years and an average duration of 24.0 years. The expense ratio comes in at 0.06%.
Vanguard Extended Duration Treasury ETF has an AUM of $2.7 billion and sees a good volume of 689,000 shares per day, on average.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 8.7%
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 38 bonds in its basket. Average maturity comes in at 26.75 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $28 million in its asset base. It trades in an average daily volume of 6,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 7%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the IDC US Treasury 20+ Year Index. It holds 41 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.28 years and an effective duration of 16.47 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $44.6 billion and an average daily volume of 47.4 million shares.