ETF Spotlight: Vanguard Short-Term Bond
May 21st at 4:10pm by Tom Lydon
ETF Spotlight on the Vanguard Short-Term Bond ETF (NYSEArca: BSV), part of an ongoing series.
Assets: $12.2 billion.
Objective: The Vanguard Short-Term Bond fund tries to reflect the performance of the Barclays U.S. 1-5 year Government/Credit Float Adjusted Index, which is comprised of investment-grade bonds with a dollar-weighted average maturity of 1 to 5 years.
Holdings: U.S. Treasuries.
What You Should Know:
- Vanguard Group sponsors the fund.
- BSV has a 0.10% expense ratio.
- The fund has 1605 holdings and the top ten make up 13.2% of the overall portfolio.
- Bond allocations include finance 10.3%, foreign 7.0%, industrial 10.5%, Treasury/Agency 70.5% and utilities 1.4%.
- Credit quality breakdown includes U.S. government 70.4%, Aaa 3.0%, Aa 6.2%, A 11.9% and Baa 8.5%.
- The bond fund has an average maturity of 2.8 years and an average duration of 2.7 years.
- BSV has a 0.48% 30-day SEC yield.
- The ETF is up 0.4% over the past three months, up 0.3% year-to-date and up 1.5% over the past year.
- “Bond prices have an inverse relationship to interest rates. If interest rates go up, bond prices go down,” according to Morningstar analyst Timothy Strauts. “There have been very few sustained periods of rising interest rates during the last 30 years.”
- ” With interest rates at or near all-time lows, investors today are rightly concerned that rates will rise in the future. BSV’s portfolio has an average duration of around three years,” Strauts added. “This means that if interest rates rise 1%, the value of BSV’s portfolio would decline by about 3%.”
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