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Treasury ETFs Gain as Slowdown, Tariff Fears Hit Yields
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Treasuries rallied as yields declined, pushing the ETFs in the space higher. This is especially true as 10-year yields dropped to the lowest level since December and bond prices are inversely related to yields. Signs of economic slowdown and Trump’s trade tariff plans have made investors wary, compelling them to flock to bond ETFs.
As such, many Treasury ETFs rose on Feb. 25. These are iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , Vanguard Extended Duration Treasury ETF (EDV - Free Report) , US Treasury 30 Year Bond ETF (UTHY - Free Report) and iShares 20+ Year Treasury Bond ETF (TLT - Free Report) .
A barrage of economic data has sparked concerns over economic growth, raising the prospect of Fed interest rate cuts sooner. U.S. business activity nearly stalled in February due to growing fears over tariffs on imports and deep cuts in federal government spending. S&P Global’s flash U.S. Composite PMI Output Index, which gauges both manufacturing and services, dropped from 52.7 in January to 50.4, marking its weakest level since September 2023 (read: 5 Stocks in the Dow ETF That Survived the Worst Week Since October).
Consumer sentiment dropped as inflation roared back. The University of Michigan consumer sentiment index fell to a 15-month low in February, while the Conference Board’s Consumer Confidence Index saw the biggest monthly decline since August 2021. Homebuilder sentiment also hit a five-month low in February. Concerns have built up in the homebuilder space that tariffs would raise the cost of building materials, including lumber and appliances, thereby leading to elevated home prices and reduced affordability.
The new administration’s tariff plans also added to the Treasury's strength. Trump’s 25% tariff on goods from Mexico and Canada, which was delayed by a month, is set to take effect in March. Early this month, Trump announced global 25% tariffs on steel and aluminum imports, which are expected to take effect on March 12. Further, Donald Trump threatened to impose 25% tariffs on automobile, semiconductor and pharmaceutical imports as soon as April. He is also considering imposing 25% tariffs on international lumber and wood products over the next month or sooner, with more to come. The prospect of a trade war can lead investors to seek refuge in Treasury securities, which are perceived as safe-haven assets (read: ETFs to Win/Lose as Trump Imposes 25% Tariffs on Steel and Aluminum).
Let’s delve deeper into the abovementioned ETFs:
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 3%
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 23 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.28 years and an effective duration of 26.66 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $296.5 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 640,000 shares.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 2.8%
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 22 securities in its basket. The effective maturity and the effective duration of the fund are 27.31 years and 27.11 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.5 billion in AUM and an average daily volume of 466,000 shares. It charges 15 bps in annual fees.
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 24.6 years and an average duration of 24.0 years. The expense ratio comes in at 0.05%.
Vanguard Extended Duration Treasury ETF has an AUM of $3.7 billion and sees a good volume of 1.2 million shares per day, on average.
US Treasury 30 Year Bond ETF offers exposure to the most recently issued 30-year US Treasury bond by tracking the ICE BofA US 30-Year US Treasury Index. It charges 15 bps in annual fees. US Treasury 30 Year Bond ETF has gathered $15.1 million in its asset base and trades in an average daily volume of around 8,000 shares.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 1.7%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE US Treasury 20+ Year Bond Index. It holds 46 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.44 years and an effective duration of 16.01 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $53 billion and an average daily volume of 32 million shares.
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Treasury ETFs Gain as Slowdown, Tariff Fears Hit Yields
Treasuries rallied as yields declined, pushing the ETFs in the space higher. This is especially true as 10-year yields dropped to the lowest level since December and bond prices are inversely related to yields. Signs of economic slowdown and Trump’s trade tariff plans have made investors wary, compelling them to flock to bond ETFs.
As such, many Treasury ETFs rose on Feb. 25. These are iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) , PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) , Vanguard Extended Duration Treasury ETF (EDV - Free Report) , US Treasury 30 Year Bond ETF (UTHY - Free Report) and iShares 20+ Year Treasury Bond ETF (TLT - Free Report) .
A barrage of economic data has sparked concerns over economic growth, raising the prospect of Fed interest rate cuts sooner. U.S. business activity nearly stalled in February due to growing fears over tariffs on imports and deep cuts in federal government spending. S&P Global’s flash U.S. Composite PMI Output Index, which gauges both manufacturing and services, dropped from 52.7 in January to 50.4, marking its weakest level since September 2023 (read: 5 Stocks in the Dow ETF That Survived the Worst Week Since October).
Consumer sentiment dropped as inflation roared back. The University of Michigan consumer sentiment index fell to a 15-month low in February, while the Conference Board’s Consumer Confidence Index saw the biggest monthly decline since August 2021. Homebuilder sentiment also hit a five-month low in February. Concerns have built up in the homebuilder space that tariffs would raise the cost of building materials, including lumber and appliances, thereby leading to elevated home prices and reduced affordability.
The new administration’s tariff plans also added to the Treasury's strength. Trump’s 25% tariff on goods from Mexico and Canada, which was delayed by a month, is set to take effect in March. Early this month, Trump announced global 25% tariffs on steel and aluminum imports, which are expected to take effect on March 12. Further, Donald Trump threatened to impose 25% tariffs on automobile, semiconductor and pharmaceutical imports as soon as April. He is also considering imposing 25% tariffs on international lumber and wood products over the next month or sooner, with more to come. The prospect of a trade war can lead investors to seek refuge in Treasury securities, which are perceived as safe-haven assets (read: ETFs to Win/Lose as Trump Imposes 25% Tariffs on Steel and Aluminum).
Let’s delve deeper into the abovementioned ETFs:
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ - Free Report) — Up 3%
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 23 bonds in its basket. iShares 25+ Year Treasury STRIPS Bond ETF has an average maturity of 27.28 years and an effective duration of 26.66 years.
iShares 25+ Year Treasury STRIPS Bond ETF has amassed $296.5 million in its asset base and charges 10 bps in fees per year. GOVZ trades in an average daily volume of 640,000 shares.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) – Up 2.8%
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 22 securities in its basket. The effective maturity and the effective duration of the fund are 27.31 years and 27.11 years, respectively.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF has $1.5 billion in AUM and an average daily volume of 466,000 shares. It charges 15 bps in annual fees.
Vanguard Extended Duration Treasury ETF (EDV - Free Report) — Up 2.4%
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 24.6 years and an average duration of 24.0 years. The expense ratio comes in at 0.05%.
Vanguard Extended Duration Treasury ETF has an AUM of $3.7 billion and sees a good volume of 1.2 million shares per day, on average.
US Treasury 30 Year Bond ETF (UTHY - Free Report) – Up 1.7%
US Treasury 30 Year Bond ETF offers exposure to the most recently issued 30-year US Treasury bond by tracking the ICE BofA US 30-Year US Treasury Index. It charges 15 bps in annual fees. US Treasury 30 Year Bond ETF has gathered $15.1 million in its asset base and trades in an average daily volume of around 8,000 shares.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report) – Up 1.7%
iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE US Treasury 20+ Year Bond Index. It holds 46 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.44 years and an effective duration of 16.01 years.
TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $53 billion and an average daily volume of 32 million shares.