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Treasury ETFs React to Taylor's Interview With Trump
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U.S. Treasury yields inched up and the dollar rallied as John Taylor, a prospective candidate for the Fed chairman, was said to have impressed President Donald Trump in an interview. Taylor is believed to be more hawkish and is known for a policy rule aimed at higher interest rates (read: Treasury ETFs Weaken in the Wake of Tax Talk and Fed Chief Rumors).
Who’s Going to be the Next Fed chair?
Trump is said to have met Stanford University economist John Taylor, believed to be a monetary policy expert, regarding his nomination as Fed chair. Taylor has served as a senior economist at the Council of Economic Advisors during the Ford and Carter administrations. He was also a member of Council of Economic Advisors during the George H. W. Bush administration. Moreover, Taylor was undersecretary of the Treasury for International Affairs from 2001 to 2005.
For weeks, Kevin Warsh had been the favorite to replace Janet Yellen. However, reports suggest Warsh’s academic credentials are not strong enough for the Fed chair. Although bond prices declined following reports of Trump’s interview with Taylor, the President is reported to have told the Wall Street Journal that he would like to see rates low, per a Bloomberg article.
A few other reports also indicated that Trump is likely to meet the more dovish Janet Yellen later this week regarding her candidacy for the Fed chair. Yellen’s supporters argue that her experience and relatively gentle stance on raising rates overshadow other factors that are evaluated when it comes to taking the final decision.
On the other hand, Taylor is a strong proponent of reducing the balance sheet size and imposing stricter monetary policy rules. If he adopts a faster rate hike policy, it might lead to slower growth in GDP. This might weigh on Trump’s target of 3% GDP growth.
Therefore, there is still a cloud of uncertainty regarding who is the most likely candidate to assume the position of the Fed chair.
This fund seeks to provide exposure to intermediate term U.S. Treasury bonds.
With $7.5 billion in AUM, it charges a fee of 15 basis points a year. It has an effective duration of 7.55 years and a weighted average maturity of 8.30 years. The fund has returned 1.8% year to date but has lost 3.2% in a year (as of Oct 16, 2017). IEF currently has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
This fund seeks to provide exposure to U.S. Treasury bonds in a wide-maturity spectrum.
It has AUM of $5.5 billion and charges a fee of 15 basis points a year. It has an effective duration of 6.03 years and a weighted average maturity of 7.56 years. The fund has returned 1.3% year to date but has lost 2.0% in a year (as of Oct 16, 2017). GOVT currently has a Zacks ETF Rank #3 with a Medium-risk outlook.
Vanguard Intermediate-Term Government Bond ETF (VGIT - Free Report)
This fund seeks to provide exposure to U.S. Treasury bonds in the five-10 years maturity spectrum.
It has AUM of $1.4 billion and charges a fee of 7 basis points a year. It has an average duration of 5.2 years and an average effective maturity of 5.6 years. The fund has returned 1.0% year to date but has lost 2.3% in a year (as of Oct 16, 2017). VGIT currently has a Zacks ETF Rank #3 with a Medium-risk outlook.
iShares 10-20 Year Treasury Bond ETF (TLH - Free Report)
This fund seeks to provide exposure to longe- term U.S. Treasury bonds in the 10-20 year maturity horizon.
It has AUM of $533.8 million and charges a fee of 15 basis points a year. It has an effective duration of 10.28 years and a weighted average maturity of 13.84 years. The fund has returned 3.1% year to date but has lost 3.2% in a year (as of Oct 16, 2017). TLH currently has a Zacks ETF Rank #3 with a High-risk outlook.
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Treasury ETFs React to Taylor's Interview With Trump
U.S. Treasury yields inched up and the dollar rallied as John Taylor, a prospective candidate for the Fed chairman, was said to have impressed President Donald Trump in an interview. Taylor is believed to be more hawkish and is known for a policy rule aimed at higher interest rates (read: Treasury ETFs Weaken in the Wake of Tax Talk and Fed Chief Rumors).
Who’s Going to be the Next Fed chair?
Trump is said to have met Stanford University economist John Taylor, believed to be a monetary policy expert, regarding his nomination as Fed chair. Taylor has served as a senior economist at the Council of Economic Advisors during the Ford and Carter administrations. He was also a member of Council of Economic Advisors during the George H. W. Bush administration. Moreover, Taylor was undersecretary of the Treasury for International Affairs from 2001 to 2005.
For weeks, Kevin Warsh had been the favorite to replace Janet Yellen. However, reports suggest Warsh’s academic credentials are not strong enough for the Fed chair. Although bond prices declined following reports of Trump’s interview with Taylor, the President is reported to have told the Wall Street Journal that he would like to see rates low, per a Bloomberg article.
A few other reports also indicated that Trump is likely to meet the more dovish Janet Yellen later this week regarding her candidacy for the Fed chair. Yellen’s supporters argue that her experience and relatively gentle stance on raising rates overshadow other factors that are evaluated when it comes to taking the final decision.
On the other hand, Taylor is a strong proponent of reducing the balance sheet size and imposing stricter monetary policy rules. If he adopts a faster rate hike policy, it might lead to slower growth in GDP. This might weigh on Trump’s target of 3% GDP growth.
Therefore, there is still a cloud of uncertainty regarding who is the most likely candidate to assume the position of the Fed chair.
Let us now discuss a few ETFs focused on providing exposure to U.S. Treasuries (see all Government Bond ETFs here).
iShares 7-10 Year Treasury Bond ETF (IEF - Free Report)
This fund seeks to provide exposure to intermediate term U.S. Treasury bonds.
With $7.5 billion in AUM, it charges a fee of 15 basis points a year. It has an effective duration of 7.55 years and a weighted average maturity of 8.30 years. The fund has returned 1.8% year to date but has lost 3.2% in a year (as of Oct 16, 2017). IEF currently has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
iShares U.S. Treasury Bond ETF (GOVT - Free Report)
This fund seeks to provide exposure to U.S. Treasury bonds in a wide-maturity spectrum.
It has AUM of $5.5 billion and charges a fee of 15 basis points a year. It has an effective duration of 6.03 years and a weighted average maturity of 7.56 years. The fund has returned 1.3% year to date but has lost 2.0% in a year (as of Oct 16, 2017). GOVT currently has a Zacks ETF Rank #3 with a Medium-risk outlook.
Vanguard Intermediate-Term Government Bond ETF (VGIT - Free Report)
This fund seeks to provide exposure to U.S. Treasury bonds in the five-10 years maturity spectrum.
It has AUM of $1.4 billion and charges a fee of 7 basis points a year. It has an average duration of 5.2 years and an average effective maturity of 5.6 years. The fund has returned 1.0% year to date but has lost 2.3% in a year (as of Oct 16, 2017). VGIT currently has a Zacks ETF Rank #3 with a Medium-risk outlook.
iShares 10-20 Year Treasury Bond ETF (TLH - Free Report)
This fund seeks to provide exposure to longe- term U.S. Treasury bonds in the 10-20 year maturity horizon.
It has AUM of $533.8 million and charges a fee of 15 basis points a year. It has an effective duration of 10.28 years and a weighted average maturity of 13.84 years. The fund has returned 3.1% year to date but has lost 3.2% in a year (as of Oct 16, 2017). TLH currently has a Zacks ETF Rank #3 with a High-risk outlook.
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 >>