Investors continue to seek the safety of U.S. bonds amid the second week of Russia’s invasion of Ukraine. As such, yields are starting to rise as more investors pile into Treasury notes.
“Yields have seen sharp falls since Russia invaded Ukraine on Feb. 24, with investors flocking to safe haven assets amid the uncertainty,” reports CNBC. “On Wednesday, however, the 10-year Treasury yield saw its biggest one-day jump since 2020, rising 18 basis points, as investors ditched government bonds for risk assets like stocks.”
Already adding to the rise of inflation is rising energy costs amid the invasion. Thankfully, as the economy continues to ward off the effects of the pandemic, growth has been able to keep up with rising energy costs.
“Fortunately, the U.S. economy has been growing at a strong pace, which should help soften the blow to economic growth from higher energy costs. But it also is exacerbating an upturn in inflation spurred by supply shortages coming out of the pandemic and strong consumer demand,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
Get Active With U.S. Bonds
As bond prices rise, investors can get active exposure with the T. Rowe Price QM U.S. Bond ETF (TAGG). The volatility that investors have been seeing as of late is more than enough reason to hand the keys to the bond portfolio over to a pro.
TAGG seeks to outperform the Bloomberg U.S. Aggregate Bond Index, which is broadly diversified, containing a mix of investment-grade, fixed income instruments that have varying maturity dates. Despite its active management strategy, the fund only carries a 0.08% expense ratio.
The obvious skew is towards U.S. debt, with Treasury notes comprising the majority of holdings. As of March 4, the top holding (11.54% of the fund’s allocation) is Treasury notes that mature in 2026.
The fund comes with a 30-day SEC yield of 2.52% (as of January 31, 2022). The fund will also typically include U.S. government and agency obligations, corporate bonds, mortgage- and asset-backed securities, and U.S. dollar-denominated securities from foreign issuers.
For more news, information, and strategy, visit the Active ETF Channel.