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5 Best Fixed Income ETFs of the First Nine Months of 2019
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Though equities have touched new all-time highs this year, the fixed income world is not far behind. The fixed income has also been enjoying a solid run on global easing policies and flight to safety.
Global Easing
The Fed has cut interest rates two times this year to sustain a decade-long economic expansion. Major central banks across the globe are also taking steps to prop up slowing economic growth that have eased global recession concerns and in turn lifted investors’ confidence (read: 5 Ultra-Cheap Growth ETFs to Tap on Global Stimulus Hopes).
Most notably, the European Central Bank cut interest rates deeper into negative territory and promised an indefinite supply of fresh asset purchases in order to revive the ailing Eurozone economy. China’s central bank trimmed its reserve requirements for the seventh time since the start of 2018, reducing the amount of cash that banks are mandated to keep on reserve and thus freeing up as much as 900 billion yuan ($126 billion) in liquidity. Meanwhile, the Bank of Japan also signaled the chance of more support measures as early as its next policy meeting in October. Many other developed and developing countries are also following the same path, wherein central banks are resorting to rates cut or launching fresh stimulus to tackle global growth headwinds.
Safe Appeal
A wave of pessimism surrounding trade news and geopolitical tensions has pushed U.S. yields down, raising demand for safe-haven bonds, especially the long-dated ones. Tit-for-tat trade tariff as well as escalation in the Middle East tensions has been the main catalyst (read: Safe Haven ETFs to Grab Amid Middle East Tensions).
Against this backdrop, we have highlighted five top-performing fixed income ETFs of this year so far. The trend will likely continue at least in the near term, given trade gyrations and cheap money flows.
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. Effective maturity and effective duration of the fund are 27.24 years each. This fund has a decent level of $351.5 million in AUM. It trades in a light average daily volume of 38,000 shares. It charges 15 bps in annual fees and has climbed 27.8% so far this year. The ETF has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (see: all Government Bond ETFs here).
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 82 bonds in total with average maturity of 25.3 years and average duration of 24.4 years. Expense ratio comes in at 0.07%. The product has amassed $1.3 billion in its asset base while seeing a good volume of 179,000 shares per day on average. It has gained 25% in the same time frame and carries a Zacks ETF Rank #5 with a High risk outlook.
With AUM of $3.9 billion, this fund invests primarily in high-quality (investment-grade) corporate bonds by tracking the Bloomberg Barclays U.S. 10+ Year Corporate Bond Index. It holds a broad basket of 2001 bonds with average maturity of 23.8 years and average duration of 14.4 years. The ETF trades in a good volume of around 424,000 shares and has 0.07% expense ratio. The product is up 21.4% so far this year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Play the Bond Bull Market With These ETFs).
FlexShares Credit-Scored US Long Corporate Bond Index Fund (LKOR - Free Report)
This fund follows the Northern Trust Credit-Scored US Long Corporate Bond Index, holding 184 bonds with none making up for more than 4.6% of assets. Its average maturity and average duration are 23.47 years of 14.55 years, respectively. The ETF charges 22 bps in annual fees and trades in paltry average daily volume of 4,000 shares. It has been able to manage $17.4 billion in its asset base and has risen 21% so far this year. The product has a Zacks ETF Rank #3 with a High risk outlook.
SPDR Portfolio Long Term Corporate Bond ETF (SPLB - Free Report)
This fund tracks the Bloomberg Barclays Long U.S. Corporate Index, charging investors 7 bps in annual fees. It holds a broad basket of 1975 bonds with average maturity of 23.46 years and an adjusted duration of 14.47 years. SPLB has AUM of $650.9 million and average daily volume of 372,000 shares. It has risen 20.9% so far this year and has a Zacks ETF Rank #3.
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5 Best Fixed Income ETFs of the First Nine Months of 2019
Though equities have touched new all-time highs this year, the fixed income world is not far behind. The fixed income has also been enjoying a solid run on global easing policies and flight to safety.
Global Easing
The Fed has cut interest rates two times this year to sustain a decade-long economic expansion. Major central banks across the globe are also taking steps to prop up slowing economic growth that have eased global recession concerns and in turn lifted investors’ confidence (read: 5 Ultra-Cheap Growth ETFs to Tap on Global Stimulus Hopes).
Most notably, the European Central Bank cut interest rates deeper into negative territory and promised an indefinite supply of fresh asset purchases in order to revive the ailing Eurozone economy. China’s central bank trimmed its reserve requirements for the seventh time since the start of 2018, reducing the amount of cash that banks are mandated to keep on reserve and thus freeing up as much as 900 billion yuan ($126 billion) in liquidity. Meanwhile, the Bank of Japan also signaled the chance of more support measures as early as its next policy meeting in October. Many other developed and developing countries are also following the same path, wherein central banks are resorting to rates cut or launching fresh stimulus to tackle global growth headwinds.
Safe Appeal
A wave of pessimism surrounding trade news and geopolitical tensions has pushed U.S. yields down, raising demand for safe-haven bonds, especially the long-dated ones. Tit-for-tat trade tariff as well as escalation in the Middle East tensions has been the main catalyst (read: Safe Haven ETFs to Grab Amid Middle East Tensions).
Against this backdrop, we have highlighted five top-performing fixed income ETFs of this year so far. The trend will likely continue at least in the near term, given trade gyrations and cheap money flows.
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. Effective maturity and effective duration of the fund are 27.24 years each. This fund has a decent level of $351.5 million in AUM. It trades in a light average daily volume of 38,000 shares. It charges 15 bps in annual fees and has climbed 27.8% so far this year. The ETF has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (see: all Government Bond ETFs here).
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 82 bonds in total with average maturity of 25.3 years and average duration of 24.4 years. Expense ratio comes in at 0.07%. The product has amassed $1.3 billion in its asset base while seeing a good volume of 179,000 shares per day on average. It has gained 25% in the same time frame and carries a Zacks ETF Rank #5 with a High risk outlook.
Vanguard Long-Term Corporate Bond ETF (VCLT - Free Report)
With AUM of $3.9 billion, this fund invests primarily in high-quality (investment-grade) corporate bonds by tracking the Bloomberg Barclays U.S. 10+ Year Corporate Bond Index. It holds a broad basket of 2001 bonds with average maturity of 23.8 years and average duration of 14.4 years. The ETF trades in a good volume of around 424,000 shares and has 0.07% expense ratio. The product is up 21.4% so far this year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Play the Bond Bull Market With These ETFs).
FlexShares Credit-Scored US Long Corporate Bond Index Fund (LKOR - Free Report)
This fund follows the Northern Trust Credit-Scored US Long Corporate Bond Index, holding 184 bonds with none making up for more than 4.6% of assets. Its average maturity and average duration are 23.47 years of 14.55 years, respectively. The ETF charges 22 bps in annual fees and trades in paltry average daily volume of 4,000 shares. It has been able to manage $17.4 billion in its asset base and has risen 21% so far this year. The product has a Zacks ETF Rank #3 with a High risk outlook.
SPDR Portfolio Long Term Corporate Bond ETF (SPLB - Free Report)
This fund tracks the Bloomberg Barclays Long U.S. Corporate Index, charging investors 7 bps in annual fees. It holds a broad basket of 1975 bonds with average maturity of 23.46 years and an adjusted duration of 14.47 years. SPLB has AUM of $650.9 million and average daily volume of 372,000 shares. It has risen 20.9% so far this year and has a Zacks ETF Rank #3.
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 >>