New 20-Year Treasury Note Adds to Investors’ Options

The 20-year Treasury note made its debut on Wednesday, which adds to investors’ options when looking at safe-haven government debt. Demand is expected to be high for the $20 billion issue.

“The government’s borrowing needs have jumped dramatically in recent weeks after Congress authorized trillions in spending to fend off an economic hit from the coronavirus pandemic, which has slammed U.S. growth. The U.S. plans to sell a total of $54 billion of the 20-year bonds over the next three months,” a Reuters report noted. “The Treasury said earlier this month it intends to increase auction sizes across all nominal coupon tenors over the May-to-July period, with the increases larger in the 7-year, 10-year, 20-year, and 30-year categories. The largest increase will be on the 10-year note.”

“U.S. national debt now stands at more than $25 trillion, up 15% since a year ago, according to U.S. Treasury Department data,” the report added.

On the opposite end of the yield curve, investors looking to get short-term exposure to Treasurys can look to funds like the Goldman Sachs Access Treasury 0-1 Year ETF (GBIL). GBIL seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE US Treasury 0-1 Year Composite Select Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is designed to measure the performance of U.S. Treasury Securities with a maximum remaining maturity of 12 months. The investment adviser uses a representative sampling strategy to manage the fund.

Additionally, investors can look at the iShares Short Treasury Bond ETF (NasdaqGM: SHV). SHV seeks to track the investment results of the ICE U.S. Treasury Short Bond Index, which measures the performance of public obligations of the U.S.

Treasuries that have a remaining maturity of equal to or greater than one month and less than one year. Additionally, the fund may invest up to 10% of its assets in U.S. government bonds not included in the underlying index, but which BFA believes will help the fund track the underlying index.

Investors can also take a look at the iShares 20+ Year Treasury Bond ETF (NasdaqGS: TLT). TLT seeks to track the investment results of the ICE U.S. Treasury 20+ Year Bond Index (the “underlying index”). The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to twenty years.

Advantages of adding TLT to your portfolio:

  • Exposure to long-term U.S. Treasury bonds
  • Targeted access to a specific segment of the U.S. Treasury market
  • Use to customize your exposure to Treasuries

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