The ADP’s strong jobs report pushed the benchmark yield for 10-year Treasuries over the 4% threshold. That’s the highest 10-year Treasury yields have been since March.
That spike in yields came from investors selling off stocks following the report’s release. The strong labor market has made investors nervous that the Federal Reserve will continue raising interest rates.
To be fair, Fed Chairman Jerome Powell has said to expect more tightening. During a monetary policy session in Sintra, Portugal last week, Powell said that “a very strong labor market” is driving the monetary tightening.
“We believe there’s more restriction coming,” Powell said.
See more: “Fixed Income Symposium Set Ahead of Next FOMC”
Use VGLT to Add More Duration
Even before this jobs report, investors had become more confident in adding duration to their portfolios. And with yields climbing, long-term Treasury ETFs like the Vanguard Long-Term Treasury ETF (VGLT) could appeal to these investors.
VGLT invests primarily in U.S. Treasury bonds with a dollar-weighted average maturity of 10 to 25 years. The fund had a 30-day SEC yield of 4.00% as of July 5. VGLT carries an expense ratio of 0.04%.
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’re low-cost and always very, very dependable.”
At Exchange 2023, Vanguard CEO Tim Buckley said that the asset manager’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.