The latest producer price index preceded Treasury yields rising on Friday. According to CNBC, yields on the two-year Treasuries are currently at around 4.323%, while yields on the five-, 10-, and 20-year Treasuries are 3.753%, 3.564%, and 3.804%, respectively.
According to the PPI, prices increased 0.3% for the month and 7.4% from a year ago. These figures come after reports that gas prices have come down while the job market has remained strong (which could keep prices up). The next consumer price index comes out next week.
While Wall Street waits to see how the Federal Reserve will move forward with interest rates, the current expectation is that the U.S. central bank will make a 50-basis-point rate hike at its policy meeting next week, which would push benchmark borrowing rates to a target range of 4.25% and 4.5%.
The Fed has issued four consecutive rate hikes of 75 basis points to curb persistently high consumer prices. Many investors are worried that the Fed’s aggressive rate hikes will push the U.S. economy into a recession.
Investors looking to take advantage of the rising yields on Treasuries may want to give the Vanguard Short-Term Treasury ETF (VGSH), the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT), and the Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT) a look.
VGSH seeks to provide current income with modest price fluctuation, invests primarily in high-quality (investment-grade) U.S. Treasury bonds, and maintains a dollar-weighted average maturity of one to three years.
VGIT, meanwhile, seeks to track the performance of a market-weighted Treasury index with an intermediate-term dollar-weighted average maturity. The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Treasury 3-10 Year Bond Index, which includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds) with maturities between three and 10 years.
Finally, VGLT seeks to track the performance of a market-weighted Treasury index with a long-term dollar-weighted average maturity. The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Long Treasury Bond Index, which includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds) with maturities greater than 10 years.
These funds each carry an expense ratio of four basis points.
For more news, information, and analysis, visit the Fixed Income Channel.