Low yields and tapering prospects aren’t holding investors back from purchasing Treasury notes. ETF provider Vanguard has a couple of options to consider.
The Federal Reserve has already made indications that they will taper their bond purchasing. The prevailing sentiment is that a deluge of bonds sold by the Fed will eventually drive yields higher in order to attract more buyers.
However, current investor activity is relaying the opposite message. A rise in COVID-19 cases as a result of the Delta variant could be spurring more investors to Treasury notes as a safe haven scramble to counter a slower economic recovery.
“Investors keep buying U.S. Treasury securities, defying predictions for a broad selloff that would send bond yields back to their March highs,” a Wall Street Journal report noted. “Yields, which move in the opposite direction of bond prices, have held steady in recent weeks after rising sharply in the first quarter and then sliding in subsequent months as investors scaled back some of their most optimistic economic forecasts.”
Get Higher Yield in Treasury Notes
Treasury notes might be lauded for their safe haven status, but that doesn’t mean that they aren’t privy to more yield. In order to get higher yields, investors will need to go further out onto the yield curve.
As such, there’s a pair of ETFs from Vanguard that investors can consider. One is the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT) and the other is the Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT).
Up first is VGIT, which gives investors exposure to safer debt issues with Treasury notes. Per the fund description, VGIT 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 Barclays 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.
Next is VGLT, which 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 Barclays U.S. Long Treasury Bond Index.
This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds), with maturities greater than 10 years. Under normal circumstances, at least 80% of the fund’s assets will be invested in bonds included in the index.
For more news, information, and strategy, visit the Fixed Income Channel.