Zero-coupon bonds often sell at a sizable discounts to face value because buyers do not get a steady stream of income as they do with traditional bonds. As zero-coupon Treasurys get close to maturity, their value increase with buy-and-hold investors getting the full value of the bond when it matures.
Because zero-coupons do not deliver regular income, the bonds and ETFs such as EDV are vulnerable to increase in short-term interest rates.
“Bottom line: While cost-effective, EDV is a Vanguard ETF that is highly sensitive to changes in interest rates, meaning that if the Fed reverses course, this ETF could be punished,” adds InvestorPlace.
Click here to read the full story on ETF Trends.
Vanguard Extended Duration Treasury ETF
