When safe havens in the current market can be difficult to find, short-term Treasuries — and short-term Treasury ETFs — are an asset class advisors should look into.
These safe haven government bond options have seen their yields rising as the U.S. Federal Reserve continues to push interest rates higher. They also offer liquid options, giving investors a nice balance between yield and the ability to offload them quickly in the open market.
“The key to ‘storing’ money in a bear market is to find a balance between the best return and most liquidity because if you’re in it for the long term, you want to be an investor, not a ‘storer,'” said Jennifer Bellis, a private wealth advisor at U.S. Bank Wealth Management in a Yahoo! Finance report.
“Short-term treasuries are the clear winner regarding parking money,” said Bellis.
One way to get exposure is via short-term Treasuries ETFs, like the Vanguard Short-Term Treasury ETF (VGSH). This ETF offers exposure to short-term government bonds, focusing on Treasury bonds that mature in one to three years.
It’s an ideal option, given the uncertainty in the current market environment. Bonds can offer investors a safe haven against stock market volatility, while short-term bonds limit the risks of potential rate rises that can rob investors of fixed income opportunities.
Overall, VGSH:
- Seeks to provide current income with modest price fluctuation.
- Invests primarily in high-quality (investment-grade) U.S. Treasury bonds.
- Maintains a dollar-weighted average maturity of one to three years.
An Ultra-Short Treasury ETF Option
Fixed income investors looking for diversified options to obtain short duration and high credit quality can opt for the Vanguard Ultra-Short Bond ETF (VUSB). It can be a better option than going with a money market fund to get a more competitive yield offering.
With its low 0.10% expense ratio, VUSB’s investment objective is to seek to provide current income while maintaining limited price volatility.
VUSB offers:
- A diversified portfolio of high-quality and, to a lesser extent, medium-quality fixed income securities.
- The fund is expected to maintain a dollar-weighted average maturity of zero to two years.
- Under normal circumstances, the fund will invest at least 80% of its assets in fixed income securities.
- The fund is designed to give investors low-cost exposure to money market instruments and short-term, high-quality bonds, including asset-backed, government, and investment-grade corporate securities.
For more news, information, and strategy, visit the Fixed Income Channel.