Another plus of buying a U.S. Treasury bill is that they are available straight from the government. So instead of paying retail, you have wholesale access from the Federal government. By buying direct you can reduce the fees that you pay. Vanguard Total Bond Market (BND) touts a 0.11% expense ratio and the annual fee rises only if your bond value rises. Some online brokers give free access to U.S. Treasuries as well, reports Matt Krantz for USA Today.
We think buying bonds through an ETF is the better way to go. Before bond ETFs came along, trying to get this kind of diversification would have been prohibitively expensive for the average investor. Now, they’re accessible to everyone.
There are around 15 ETFs with holdings in U.S. Treasuries. Because the liquidity in the underlying market is sufficient, the U.S. Treasury market is the largest in the world, reports Jonathan Bernstein for Seeking Alpha.
- iShares Lehman TIPS Bond (TIP): up 4.6% year-to-date
- SPDR Barclays TIPS (IPE): up 3.5% year-to-date
- Vanguard Extended Duration Treasury ETF (EDV): down 3.5% year-to-date
- iShares Lehman 1-3 Year Treasury Bond (SHY): up 2.5% year-to-date
For full disclosure, Tom Lydon’s clients own shares of TIP, SHY.