Bond ETF Investors May Find Value in Short-Term Treasuries

Yields on two-year U.S. Treasury notes hit the 2% milestone Friday for the first time in nine years. After the steady decline in short-term bonds and the rise in yields, bond exchange traded fund investors may reconsider short-term Treasuries.

The short-term bond benchmark crossed 2% Friday for the first time since 2008, and the higher income now provided by short-term Treasuries could lure more investors to the market after years of depressed rates, reports Ben Eisen for the Wall Street Journal.

Furthermore, as the yield rises relative to comparable government bond benchmarks abroad, it could also draw greater foreign investment interest.

“A 2.0% yield has been a target yield for many investors to earn over the last several years in this lower rate environment,” Andrew Pace, vice president at Performance Trust Capital Partners LLC, told the Wall Street Journal. “With the 2yr Treasury crossing 2.0%, many investors may migrate shorter.”

Short-term Treasury yields are highly sensitive to changes in the Federal Reserve’s interest rates. The central bank has already hiked rates three times and is expected to raise interest rates three more times this year.