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Global Easing Policies Push Treasury ETFs Higher

Sweta Killa

The central banks across the globe are once again moving to easy monetary policies with some signaling interest rate cuts and some others planning to launch fresh stimulus to tackle global growth headwinds.

The Federal Reserve in its latest meeting hinted at future rate cuts to protect the economy from trade conflicts and other threats. Meanwhile, European Central Bank (ECB) kept interest rates on hold at record-low levels until at least the second half of 2020 while the Bank of Japan also pledged to maintain the current low rates “at least until the spring of 2020” (read: Sector ETFs & Stocks to Buy or Avoid Post Fed Meeting).

Australia’s central bank slashed the benchmark rates twice this year to a record low of 1%. New Zealand’s central bank cut its benchmark interest rate for the first time in two-and-a-half years. India also cut interest rates for the third time. Many other countries like Indonesia, Korea, Russia, South Africa, Turkey and Brazil are also expected to cut rates in the coming months.

The easy money across the globe has sent yields down. Notably, yield on 10-year Treasuries notes dropped to below 2%, its lowest level since November 2016. This resulted in a surge in Treasury bonds. Further, the bouts of weak economic data across the globe have sparked growth worries, raising the appeal for Treasuries as a safe haven.

Given this, we have highlighted five Treasury bond ETFs that have been surging this year (see: all Government Bond ETFs here).

PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF ZROZ

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 27.45 years each. This fund has a decent level of $269.2 million in AUM while a light average daily volume of 28,000 shares. It charges 15 bps in annual fees and has gained 16.9% so far this year. The ETF has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.

Vanguard Extended Duration Treasury ETF EDV

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 25.2 years and average duration of 24.2 years. Expense ratio comes in at 0.07%. The product has amassed $1.1 billion in its asset base while seeing a moderate volume of 158,000 shares per day on average. It has added 15.4% in the same time frame and has a Zacks ETF Rank #5 with a High risk outlook (read: Market-Beating Fixed Income ETFs of Q2).

iShares 20+ Year Treasury Bond ETF TLT

This is the most popular and liquid ETF in the long-dated bond space with AUM of $14.1 billion and average daily volume of 8.5 million shares. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 35 securities in its basket. The fund has average maturity of 25.45 years and effective duration of 17.81 years. It charges 15 bps in fees per year and has gained 11.9% in the same time frame. The product has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: First-Half 2019 ETF Asset Flow Roundup).

Vanguard Long-Term Government Bond ETF VGLT

With AUM of $1.2 billion, this fund follows the Bloomberg Barclays U.S. Long Government Float Adjusted Index. It holds 51 bonds in its basket with average maturity of 25.4 years and average duration of 17.5 years. The ETF trades in a good volume of around 255,000 shares and has 0.07% expense ratio. The product is up 11.8% so far this year and has a Zacks ETF Rank #5 with a High risk outlook.

SPDR Portfolio Long-Term Treasury ETF SPTL

This fund tracks the Bloomberg Barclays Long U.S. Treasury Index, charging investors 6 bps in annual fees. It holds 57 bonds in its basket with average maturity of 25.03 years and an adjusted duration of 18.01 years. SPTL is one of the popular choices in the long-term Treasury space with AUM of $2.4 billion and average daily volume of 998,000 shares. SPTL has risen 11.5% so far this year and is a #3 Ranked ETF.

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Vanguard Long-Term Treasury ETF (VGLT): ETF Research Reports
 
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
 
iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
 
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ): ETF Research Reports
 
SPDR Portfolio Long Term Treasury ETF (SPTL): ETF Research Reports
 
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