Bond Prices Could Be Too Good to Pass Up in Current Market | ETF Trends

Investors could be sensing that the tumult in the bond market could be over, pushing them back into the debt market with renewed confidence. It makes sense if prices are depressed to a point where they’re too good to simply pass up.

“Bonds are back, say investors who are daring to buy into the battered market,” the Wall Street Journal said.

“Stability emerged in debt markets this week, with the 10-year U.S. Treasury yield retreating from a peak over 3% following a five-month rout that worsened as stocks plummeted,” the WSJ added. “While most of the buyers anticipate further turmoil if the U.S. economy slides into recession, bond prices have fallen to levels they say are too good to pass up, offering a credible alternative to stocks.

That said, there are a few options to consider from Vanguard. One, the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP), involves getting inflation protection, which is almost imperative in the current market.

VTIP seeks to track the Bloomberg U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index’s performance. The index is a market capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than five years.

2 More Options from Vanguard

With the expectation that the U.S. Federal Reserve will hike rates further, investors 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.

Shortening duration can help with interest rate risk as yields continue to tick higher. The benchmark 10-year note in particular reached a high not seen in a couple of months as it continued to push past the 1.5% yield marker.

Lastly, fixed income investors can try to stay ahead of inflation by opting for higher yield using stock dividends. That can be done with the Vanguard High Dividend Yield Index Fund ETF Shares (VYM).

Dividends offer an alternate route to high yield debt with ETFs like VYM. The fund employs an indexing investment approach designed to track the performance of the FTSE High Dividend Yield Index, which consists of common stocks of companies that pay dividends that are generally higher than average.

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