Consider Treasury Funds of Varying Durations | ETF Trends

With equity markets showing continued volatility, more investors are looking to up their allocations to fixed income, particularly U.S. Treasury funds. After all, fixed income markets are in a much higher yielding environment after the Federal Reserve has raised interest rates nine times, bringing the Fed funds rate up 475 basis points.

“The income is back in fixed income,” said JoAnne Bianco, a partner of BondBloxx Investment Management, adding that yields for most fixed income assets represent “an over doubling of yields since the beginning of last year.”

For investors looking to up their allocation to Treasury bonds, BondBloxx offers a suite of eight duration-specific U.S. Treasury ETFs to offer investors more precise duration management tools. These duration-specific Treasury ETFs seek to offer investors a more precise, lower-cost way to get exposure to U.S. Treasury Securities.

The funds track a series of indexes developed by Bloomberg Index Services that include duration-constrained subsets of U.S. Treasury bonds with more than $300 billion outstanding. They’re also designed to track indexes that achieve target durations using U.S. Treasury securities, instead of specific maturities or maturity ranges.

See more: “Yields Now at Rates Never Seen Before

For investors who are uncertain about what lies ahead, they could consider Treasuries with shorter durations, such as the BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF), the BondBloxx Bloomberg One Year Target Duration US Treasury ETF (XONE), and the BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO).

For investors who believe that the Fed may be nearing the end of its rate hiking cycle, or those who expect a recession, they could consider the middle part of the Treasury curve. This includes such funds as the BondBloxx Bloomberg Three Year Target Duration US Treasury ETF (XTRE), the BondBloxx Bloomberg Five Year Target Duration US Treasury ETF (XFIV), and the BondBloxx Bloomberg Seven Year Target Duration US Treasury ETF (XSVN).

And for investors who anticipate a hard landing, they could consider the longest dated treasuries as a potential total return opportunity, since bonds further out on the curve have performed well in hard landing scenarios. This includes the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN) and the BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY).

Launched in October of 2021 to provide precision ETF exposure for fixed income investors, Gallegos co-founded BondBloxx with ETF industry leaders Leland Clemons, Tony Kelly, Mark Miller, Brian O’Donnell, and Elya Schwartzman. The team has collectively built and launched over 350 ETFs at firms including BlackRock, JPMorgan, State Street, Northern Trust, and HSBC.

For more news, information, and analysis, visit the Institutional Income Strategies Channel.