Proprietary Data Insights Financial Pros’ Top Bond ETF Searches in the Last Month
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Experts Pick Their Top 5 Bond ETFs |
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Yesterday’s inflation data suggested rate cuts may only be a few months away. When interest rates fall, bond prices tend to rise, creating opportunities, if you know where to look. Fortunately, our trusty TrackStar data sniffed out the top bond ETFs searched out by financial pros. At the top of the list is the iShares 20+ Year Treasury Bond (TLT), one of the most liquid and popular bond ETFs out there. Is this the best ETF to bet on rate cuts? Let’s find out. Key Facts About TLT
Debt (AKA bonds) come in two forms: government and corporate, with different maturity dates. Typically, the longer a bond has until maturity, the higher the interest rate. Government debt is considered safer, with U.S. Treasury Bonds often used as the risk-free rate since the U.S. government has never defaulted on its debt. The TLT ETF holds a basket of U.S. Treasury Bonds with maturities 20 year or more into the future. The average maturity amongst the ETFs 44 holdings is 25.62 years.
Investors may choose to own U.S. Treasuries for a variety of reasons: regular income payments from coupons, a hedge against inflation, or as an alternative to holding cash. Performance Higher interest rates lead to lower bond prices. Thus, when the Fed hiked interest rates, U.S. Treasuries lost value. Consequently, the total returns over the last several years have been abysmal.
That said, many believe that rates will not go any higher. And if the Fed lowers rates, then the price of these bonds increases, delivering capital appreciation for investors. Competition Now, there are other types of bonds and bond ETFs to choose from. These are the four that rounded out the top five searches by financial pros.
Leveraged and long-term bonds were crushed by interest rate hikes. The drop in value for junk bonds was offset by the high dividend payments. And the short-term Treasuries experienced a much smaller drop in value when rates increased.
Our Opinion 9/10 With interest rates at multi-decade highs and signs that the Fed will cut rates in the near future, we like the TLT as a core holding for any investment portfolio. Plus, you get paid a healthy dividend while you wait. |
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