The issuance party that 2024 is experiencing in the bond market isn’t relegated to just corporate debt. The U.S. Treasury is also joining in on the action, giving fixed income investors opportunities in safe haven government debt.
As reported by the Financial Times, the U.S. Treasury will be holding debt auctions over the course of the next few months to address a federal budget deficit. That said, it could be an ideal time for fixed income investors to get Treasury debt exposure as fresh supply enters the government bond market.
“The US Treasury will hold some of its largest-ever debt auctions in the coming three months in an effort to fill the yawning federal budget deficit,” the report said. “The Treasury said on Wednesday it would increase the size of auctions at most maturities for the next three months, with two-year and five-year auctions hitting record sizes.”
With the U.S. Federal Reserve keeping rates steady yet again, it could be an opportune time for investors to lock in yields now before eventual rate cuts occur. Given that there is no specific time horizon on when actual rate cuts take place, this gives investors ample time to act. For maximizing yield, investors may want to look at longer-term debt, specifically intermediate or long-term Treasury notes.
2 Treasury ETF Options
When it comes to intermediate Treasury notes, one fund worth noting is the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT). Per its fund description, VGIT seeks to track the performance of the Bloomberg U.S. Treasury 3-10 Year Bond Index. This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds) with maturities between three and 10 years. VGIT carries a low 0.04% expense ratio and a 30-day SEC yield of just over 4.03% as of January 29.
For additional yield opportunities, fixed income investors may want to look at the Vanguard Long-Term Treasury ETF (VGLT), which tracks the performance of a market-weighted Treasury index with a long-term dollar-weighted average maturity. VGLT employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Long Treasury Bond Index. That index includes fixed income securities issued by the U.S. Treasury (also not including inflation-protected bonds) with maturities greater than 10 years. VGLT has a low 0.04% expense ratio and a 30-day SEC yield of just over 4.44% as of January 29.
For more news, information, and analysis, visit the Fixed Income Channel.