The 5 Most Searched Treasury Bond ETFs - InvestingChannel

The 5 Most Searched Treasury Bond ETFs

Proprietary Data Insights

Retail’s Top Treasury Bond ETF Searches in the Last Month

RankTickerNameSearches
#1TLTiShares 20+ Year Treasury Bond ETF27,507
#2SGOViShares 0-3 Month Treasury Bond ETF1,802
#3BILSPDR Barclays 1-3 Month T-Bill ETF1,444
#4EDVVanguard Ext Duration Treasury ETF1,441
#5IEFiShares 7-10 Year Treasury Bond ETF1,430
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The 5 Most Searched Treasury Bond ETFs

Everyone is focused on the Fed’s interest rate decision this week.

However, according to our TrackStar data, financial pros and retail investors are more interested in bonds than stocks compared to the typical search history.

And why shouldn’t they be?

The Fed’s interest rate decisions directly impact the price of U.S. Treasuries.

That’s why we’ve seen an uptick across the board in search volume for U.S. Treasury ETFs by retail traders.

At the top of that list is iShares 20+ Year Treasury Bond ETF TLT.

This is definitely one of the most popular ETFs for traders and investors looking for exposure to the most volatile part of the yield curve.

But is it a great idea for your investment portfolio?

Key Facts About TLT

  • Net assets: $63.9 billion
  • 12-month trailing yield: 3.57%
  • Inception: July 22, 2002
  • Expense ratio: 0.15%
  • Number of holdings: 47

The U.S. government issues U.S. Treasury debt to pay for government spending above and beyond what tax receipts bring in.

Debt is issued with different maturity dates and can either have regular payments (coupons) or be sold at a steeper discount without one (zero coupon).

Upon maturity, Treasuries are redeemed at par value, which is $1,000.

Generally, the interest rates are lower for debt with less time until maturity than with more time.

However, expectations for near-term inflation and interest rate changes by the Fed can cause the yield curve to invert, where near-term interest rates are higher than long-term rates.

As an example, the current 1-month interest rate is over 5%, while the 20-year rate is closer to 4%.

The TLT ETF aims to hold a portfolio of U.S. Treasuries with maturity dates 20 years or more into the future.

As the table of the top holdings below shows, the ETF holds an average maturity of 25 years.

Data

Source: iShares

Longer-dated U.S. Treasury notes are more price-sensitive than shorter-dated ones.

Why?

If you held a 1-month Treasury note, and the rates changed in a way that wasn’t in your favor, you could easily hold the note until maturity without much opportunity cost.

That doesn’t work so well when there is another 25 years before maturity.

Consequently, the magnitude of change on longer-dated Treasury notes is greater than shorter-dated ones.

Performance

Treasury yields and price are inversely related, meaning they move in opposite directions.

To help illustrate this point, imagine a Treasury that pays a $20 coupon.

If the Treasury costs $1,000, the yield is 2%. If the Treasury costs $500, the yield is 4%.

So, when the Fed raised interest rates, the value of bonds rapidly declined.

Thus, the TLT has declined in value over the last few years.

Returns

Source: iShares

Competition

As our search data illustrates, there are different ways to invest in the Treasury market.

Below are some alternative ETFs popular with today’s traders.

  • iShares 0-3 Month Treasury Bond ETF (SGOV): This ETF owns Treasuries that expire in the next three months.
  • SPDR Barclays 1-3 Month T-Bill ETF (BIL): The BIL is slightly different from the SGOV as it holds Treasuries with maturities between 1-3 months in the future.
  • Vanguard Ext Duration Treasury ETF (EDV): The EDV is Vanguard’s version of the TLT, investing in Treasuries with maturities between 20-30 years in the future.
  • iShares 7-10 Year Treasury Bond ETF (IEF): The IEF seeks more of a middle ground, owning Treasuries that mature 7-10 years down the road.

Assets 

As you can see, the high interest rates on short-duration bonds have helped the SGOV and BIL outperform the others over the past few years.

And, as expected, longer-duration maturities in the TLT and EDV significantly underperformed as their prices are more sensitive to interest rate changes.

 

Our Opinion 10/10 

In the short run, with the Fed expected to continue on a rate cutting regime, we would expect the past performance to flip, with the TLT outperforming shorter-duration Treasury ETFs like the SGOV or BIL.

For both traders and investors, the TLT boasts plenty of liquidity, weekly options, and experienced management that make it the best option for long-duration U.S. Treasury ETFs.

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