Treasury yields rose sharply on Friday after the Labor Department posted a hotter-than-expected U.S. jobs report for November. The yield on the 2-year Treasury rose to 4.367% from 4.254% on Thursday. Meanwhile, the yield on the 10-year Treasury jumped to 3.595% from 3.525% as of late Thursday, and the yield on the 30-year Treasury rose to 3.662% from 3.633%.
The latest jobs report showed that showed the U.S. added 263,000 jobs in November, well above the 200,000 new jobs economists had expected. The unemployment rate was unchanged at 3.7%, while average hourly wages rose 0.6% to $32.82 an hour. Job gains for the prior two months were revised higher.
MarketWatch quoted Jason Pride, chief investment officer of private wealth at Glenmede, as calling the report, “hotter than expected.”
“While the Fed may slow down its rate increases from the 0.75% per meeting pace to 0.50% per meeting pace, it may also place pressure on them to extend those rate increases further into 2023,” Pride said.
For investors looking to take advantage of the high yields on Treasuries, Vanguard has a suite of ETFs that could be worth considering, including the Vanguard Short-Term Treasury ETF (VGSH), the Vanguard Short-Term Inflation-Protected Securities ETF (VTIP), the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT), and the Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT).
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.
VTIP tracks the Bloomberg U.S. Treasury Inflation-Protected Securities 0-5 Years Index, investing in debt with a remaining maturity of fewer than five years and a mix of short- and medium-term duration, giving some protection against rising interest rates.
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 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.
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 four funds all carry an expense ratio of just four basis points.
For more news, information, and analysis, visit the Fixed Income Channel / VettaFi | ETF Trends.