As Investors Get Back Into Government Bonds, Here Are 2 Options

At some point, the bond market was going to rally again after seeing prices depress as yields shot higher. Whether or not the rally stays is anyone’s guess, but investors are betting on more strength ahead, diving back into government bonds.

As the bond market starts to show signs of life again, investors appear to be de-risking from stocks and cryptocurrencies. Despite inflation fears, a potential recession could also be driving investors back into bonds.

Either way, bond funds focusing on safe-haven Treasuries are seeing strong inflows.

“Lured by higher interest rates and spooked by turmoil in stocks, investors poured a net $20 billion into mutual and exchange-traded funds that focus on buying ordinary U.S. Treasuries over the four-week period ended May 25, according to Refinitiv Lipper,” the Wall Street Journal report said. “That marked the largest infusion over a four-week span in records going back 29 years.”

Bond investors looking for ETF exposure, but want to limit duration can opt for the Vanguard Short-Term Treasury ETF (VGSH). This ETF offers exposure to short-term government bonds, focusing on Treasury bonds that mature in one to three years.

Overall, VGSH:

  • Seeks to provide current income with modest price fluctuation
  • Invests primarily in high-quality (investment-grade) U.S. Treasury bonds
  • Maintains a dollar-weighted average maturity of one to three years

A Broad Corporate Bond Option

For a diverse array of corporate bond exposure, investors can opt for the Vanguard Total Corporate Bond ETF ETF Shares (VTC), which seeks to track the performance of a broad, market-weighted corporate bond index. The fund is a fund of funds and employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market.

VTC offers:

  1. Performance tied to the Bloomberg Barclays U.S. Corporate Bond Index
  2. Broad, diversified exposure to the investment-grade U.S. corporate bond market
  3. A unique ETF of ETF structure
  4. An intermediate-duration portfolio, with exposure to short-, intermediate-, and long-term maturities
  5. Current income with high credit quality

For more news, information, and strategy, visit the Fixed Income Channel.