Consider Treasuries of Any Duration as Yields Near 5%

The two-year Treasuries yield reached 4.973% after the Labor Department released its latest inflation figures. Meanwhile, the yield on the benchmark 10-year note was at 4.239%.

The consumer price index increased by 0.6% last month. This marks the largest gain since June 2022, after rising just 0.2% every month in the previous two months. Core inflation ran at a 4.3% year-on-year rate in August from 4.7% the previous month.

Despite this being the biggest increase in U.S. consumer prices in a year, the underlying pace of inflation eased up in August. This suggests that the Fed could pause its rate hikes next week.

See more: “Corporate Bonds Can Be a Part of a Retirement Portfolio

With Treasury yields within the 4% to 5% range, investors may be looking into adding Treasury ETFs into their portfolios. Vanguard has a suite of such funds, including the Vanguard Short-Term Treasury ETF (VGSH), the Vanguard Intermediate-Term Treasury ETF (VGIT), and the Vanguard Long-Term Treasury ETF (VGLT).

VGSH invests primarily in investment-grade U.S. Treasury bonds with a dollar-weighted average maturity of 1 to 3 years. VGIT, meanwhile, targets IG Treasuries with an average maturity of five to 10 years. VGLT invests in Treasuries with an average maturity of 10 to 25 years.

All three funds have an expense ratio of four basis points.

So Many Low-Cost Choices

VettaFi’s vice chairman Tom Lydon called Vanguard “the Hoover of the ETF industry” for how it’s vacuumed up investor dollars.

“They are just rock solid,” Lydon said. “They have so many choices. They’re low-cost and always very, very dependable.”

Vanguard’s CEO Tim Buckley said at Exchange 2023 that the firm’s goal is “to make sure we’re producing the top performing funds and ETFs out there.”

“We’ll wrap it with low-cost, scalable advice and deliver them on a world-class, digitally enabled platform,” he added. “And if you do that well and you can keep improving it, you’ll create value into the future.”

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