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Treasury ETFs Gaining on Slowdown Concerns, Rate Cut Bets
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The bond market has made a remarkable comeback amid the recent equity market rout due to growing concern about recession fears. The anxiety has led investors to seek refuge in Treasury securities, perceived as safe-haven assets. A Bloomberg index that tracks both US government and high-quality corporate bonds has gained 2% since late July against a 6% decline for the S&P 500.
Additionally, bets that the Fed would cut interest rates in September drove Treasuries higher. While most ETFs in the Treasury space are surging, we have highlighted five that are leading the way higher in a month. These are PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - 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) .
Traders are betting that the U.S. economy has lost steam and is on the verge of sliding toward a recession, given rising unemployment, high interest rates and fading confidence in the tech sector. Big technology companies’ shares, particularly those investing heavily in artificial intelligence (AI), seem overvalued, leading to the recent sell-offs in equity markets and raising the appeal for Treasuries (read: Low-Beta ETFs to Buy Amid Market Turmoil).
The labor market cooled in July as the economy added 114,000 jobs, 35% fewer than expected. Unemployment rose from 4.1% to 4.3%, the highest since October 2021, and represented the fourth consecutive monthly increase. The data prompted concerns about a recession. Another batch of data from the Institute for Supply Management also indicates slowdown worries. Manufacturing activity fell in July, marking the fourth straight month of contraction.
The latest producer prices data showed signs of soft inflation, raising the prospect of rate cuts in September. Per the CME Fedwatch Tool, the majority of traders now expect the Fed to pursue a 50 bps interest rate cut next month.
Let’s delve deeper into the abovementioned ETFs:
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 6.6%
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 24 securities in its basket. The effective maturity and the effective duration of the fund are 27.71 years and 27.01 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.5 billion in AUM and an average daily volume of 411,000 shares. It charges 15 bps in annual fees.
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 6.5%
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 21 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.33 years and an effective duration of 26.77 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $340.4 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 467,000 shares.
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 80 bonds with an average maturity of 24.7 years and an average duration of 24.1 years. The expense ratio comes in at 0.06%.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 5%
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 48 bonds in its basket. Average maturity comes in at 26.76 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $49.2 million in its asset base. It trades in an average daily volume of 14,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 4.4%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Years Bond Index. It holds 45 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.58 years and an effective duration of 16.59 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $59.4 billion and an average daily volume of 36 million shares.
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Treasury ETFs Gaining on Slowdown Concerns, Rate Cut Bets
The bond market has made a remarkable comeback amid the recent equity market rout due to growing concern about recession fears. The anxiety has led investors to seek refuge in Treasury securities, perceived as safe-haven assets. A Bloomberg index that tracks both US government and high-quality corporate bonds has gained 2% since late July against a 6% decline for the S&P 500.
Additionally, bets that the Fed would cut interest rates in September drove Treasuries higher. While most ETFs in the Treasury space are surging, we have highlighted five that are leading the way higher in a month. These are PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - 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) .
Traders are betting that the U.S. economy has lost steam and is on the verge of sliding toward a recession, given rising unemployment, high interest rates and fading confidence in the tech sector. Big technology companies’ shares, particularly those investing heavily in artificial intelligence (AI), seem overvalued, leading to the recent sell-offs in equity markets and raising the appeal for Treasuries (read: Low-Beta ETFs to Buy Amid Market Turmoil).
The labor market cooled in July as the economy added 114,000 jobs, 35% fewer than expected. Unemployment rose from 4.1% to 4.3%, the highest since October 2021, and represented the fourth consecutive monthly increase. The data prompted concerns about a recession. Another batch of data from the Institute for Supply Management also indicates slowdown worries. Manufacturing activity fell in July, marking the fourth straight month of contraction.
The latest producer prices data showed signs of soft inflation, raising the prospect of rate cuts in September. Per the CME Fedwatch Tool, the majority of traders now expect the Fed to pursue a 50 bps interest rate cut next month.
Let’s delve deeper into the abovementioned ETFs:
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 6.6%
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 24 securities in its basket. The effective maturity and the effective duration of the fund are 27.71 years and 27.01 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.5 billion in AUM and an average daily volume of 411,000 shares. It charges 15 bps in annual fees.
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 6.5%
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 21 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.33 years and an effective duration of 26.77 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $340.4 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 467,000 shares.
Vanguard Extended Duration Treasury ETF (EDV - Free Report) — Up 5.7%
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 80 bonds with an average maturity of 24.7 years and an average duration of 24.1 years. The expense ratio comes in at 0.06%.
Vanguard Extended Duration Treasury ETF has an AUM of $3.8 billion and sees a good volume of 600,000 shares per day, on average (read: 5 Safe ETF Zones to Invest in Amid Rekindled Recession Fears).
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY - Free Report) – Up 5%
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 48 bonds in its basket. Average maturity comes in at 26.76 years.
BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF has accumulated $49.2 million in its asset base. It trades in an average daily volume of 14,000 shares and charges 13 bps in annual fees.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 4.4%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Years Bond Index. It holds 45 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.58 years and an effective duration of 16.59 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $59.4 billion and an average daily volume of 36 million shares.