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The U.S. Treasury bonds, especially the long-dated ones, have gained popularity lately especially in the wake of declining yield and demand for safe haven amid the trade turmoil. This is especially true, as the spat between the United States and its major partners especially China has turned bitter with a tit-for-tat exchange of tariffs.
Amid escalating dispute, Trump is seeking to curb many Chinese companies from investing in U.S. technology firms and block additional technology exports to China. The Treasury Department is working on the rules to block companies with at least 25% Chinese ownership from buying companies involved in "industrially significant technology.” The measures are expected to be announced by the end of this week and are intended to counter Beijing's Made in China 2025 strategic plan.
The potential curbs came on the top of tariff imposed on $50 billion worth of Chinese goods; of which penalties on $34 billion will come into effect on Jul 6. Trump has further announced $400 billion tariffs of up to $400 billion on Chinese goods if Beijing retaliates (read: 5 ETF Ways to Hedge Stock Market Volatility).
The trade dispute with the European Union (EU) also deepened on Jun 22 after Trump tweeted that he would impose another 25% tariff, targeting imported autos from the European Union. The response came following EU’s threat of 25% duties on $3.2 billion worth of American goods exported to the 28-member bloc, starting Jun 22, against U.S. tariffs on European steel and aluminum. The worsening tariff talks could ignite a global recession, compelling investors to take flight to safety.
Further, the behavior of the yield curve justifies the bullish trend in Treasuries. This is because the short end of the yield curve is rising faster than the long end and the spread between the 2-year and 10-year yields tightened to 32 bps, indicating the lowest level since 2007. This trend will likely continue given the tightening Fed policy. Moreover, emerging markets’ fallout and uncertainty in Europe are resulting in significant bond flows back into U.S. Treasuries.
As such, long-term Treasury bond ETFs have been on the rise over the past week and will likely continue to do so at least for the near term. Below we have profiled five ETFs that are surging the most on trade worries. Though most of these funds have an unfavorable Zacks ETF Rank of 4 (Sell) or 5 (Strong Sell), they look interesting especially for as long as trade worries prevail (see: all Government Bond ETFs here).
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report)
This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 20 securities in its basket. Both effective maturity and effective duration of the fund are 27.22 years. This fund has a decent level of $161.9 million in AUM while sees a light average daily volume of 18,000 shares. It charges 15 bps in annual fees and has gained 2.8% over the past week.
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 78 bonds in total with average maturity of 25.0 years and average duration of 24.6 years. Expense ratio comes in at 0.07%. The product has amassed $547.3 million in its asset base while sees moderate volume of 69,000 shares per day on average. It has added 2.6% in the same time frame.
This is the most popular and liquid ETF in the long-dated bond space with AUM of over $7.2 billion and average daily volume of 8.5 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 31 securities in its basket. The fund has average maturity of 25.71 years and effective duration of 17.52 years. It charges 15 bps in fees per year and has added 1.8% in the same time frame (read: Renewed Trade Spat Grips Market: 6 ETF Buying Zones).
With AUM of $621.9 million, this fund follows the Bloomberg Barclays U.S. Long Government Float Adjusted Index. It holds 51 bonds in its basket with average maturity of 25 years and average duration of 17.3 years. The ETF trades in good volumes of around 116,000 shares and has 0.07% in expense ratio. The product is up 1.8% over the past week.
iShares 10-20 Year Treasury Bond ETF (TLH - Free Report)
This fund tracks the performance of the ICE U.S. Treasury 10-20 Year Bond Index and holds 13 bonds in its basket. Average maturity and effective duration come in at 14.77 years and 10.69 years, respectively. TLH has accumulated $588.8 million in its asset base while trading in lower volumes of 46,000 shares a day on average. It charges 15 bps in annual fees and has gained 1.1% over the past week.
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Treasury ETFs Surging: 5 Best Performers
The U.S. Treasury bonds, especially the long-dated ones, have gained popularity lately especially in the wake of declining yield and demand for safe haven amid the trade turmoil. This is especially true, as the spat between the United States and its major partners especially China has turned bitter with a tit-for-tat exchange of tariffs.
Amid escalating dispute, Trump is seeking to curb many Chinese companies from investing in U.S. technology firms and block additional technology exports to China. The Treasury Department is working on the rules to block companies with at least 25% Chinese ownership from buying companies involved in "industrially significant technology.” The measures are expected to be announced by the end of this week and are intended to counter Beijing's Made in China 2025 strategic plan.
The potential curbs came on the top of tariff imposed on $50 billion worth of Chinese goods; of which penalties on $34 billion will come into effect on Jul 6. Trump has further announced $400 billion tariffs of up to $400 billion on Chinese goods if Beijing retaliates (read: 5 ETF Ways to Hedge Stock Market Volatility).
The trade dispute with the European Union (EU) also deepened on Jun 22 after Trump tweeted that he would impose another 25% tariff, targeting imported autos from the European Union. The response came following EU’s threat of 25% duties on $3.2 billion worth of American goods exported to the 28-member bloc, starting Jun 22, against U.S. tariffs on European steel and aluminum. The worsening tariff talks could ignite a global recession, compelling investors to take flight to safety.
Further, the behavior of the yield curve justifies the bullish trend in Treasuries. This is because the short end of the yield curve is rising faster than the long end and the spread between the 2-year and 10-year yields tightened to 32 bps, indicating the lowest level since 2007. This trend will likely continue given the tightening Fed policy. Moreover, emerging markets’ fallout and uncertainty in Europe are resulting in significant bond flows back into U.S. Treasuries.
As such, long-term Treasury bond ETFs have been on the rise over the past week and will likely continue to do so at least for the near term. Below we have profiled five ETFs that are surging the most on trade worries. Though most of these funds have an unfavorable Zacks ETF Rank of 4 (Sell) or 5 (Strong Sell), they look interesting especially for as long as trade worries prevail (see: all Government Bond ETFs here).
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report)
This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 20 securities in its basket. Both effective maturity and effective duration of the fund are 27.22 years. This fund has a decent level of $161.9 million in AUM while sees a light average daily volume of 18,000 shares. It charges 15 bps in annual fees and has gained 2.8% over the past week.
Vanguard Extended Duration Treasury ETF (EDV - Free Report)
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 78 bonds in total with average maturity of 25.0 years and average duration of 24.6 years. Expense ratio comes in at 0.07%. The product has amassed $547.3 million in its asset base while sees moderate volume of 69,000 shares per day on average. It has added 2.6% in the same time frame.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report)
This is the most popular and liquid ETF in the long-dated bond space with AUM of over $7.2 billion and average daily volume of 8.5 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 31 securities in its basket. The fund has average maturity of 25.71 years and effective duration of 17.52 years. It charges 15 bps in fees per year and has added 1.8% in the same time frame (read: Renewed Trade Spat Grips Market: 6 ETF Buying Zones).
Vanguard Long-Term Government Bond ETF (VGLT - Free Report)
With AUM of $621.9 million, this fund follows the Bloomberg Barclays U.S. Long Government Float Adjusted Index. It holds 51 bonds in its basket with average maturity of 25 years and average duration of 17.3 years. The ETF trades in good volumes of around 116,000 shares and has 0.07% in expense ratio. The product is up 1.8% over the past week.
iShares 10-20 Year Treasury Bond ETF (TLH - Free Report)
This fund tracks the performance of the ICE U.S. Treasury 10-20 Year Bond Index and holds 13 bonds in its basket. Average maturity and effective duration come in at 14.77 years and 10.69 years, respectively. TLH has accumulated $588.8 million in its asset base while trading in lower volumes of 46,000 shares a day on average. It charges 15 bps in annual fees and has gained 1.1% over the past week.
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 >>