Here’s Why Treasury ETFs Are Scaling New Highs


Image Source: PixabayTreasuries have been witnessing strong momentum in recent weeks, buoyed by Fed rate cut speculations. The latest inflation data signals confirmed bets that the Fed will cut rates next week, pushing up Treasury ETFs to new highs. Notably, the 10-year yields dropped to a 30-month low of 6.82%, while 2-year yields are hovering near this year’s low of 3.67%.While the Treasury rally has been broad-based across various maturities, we have highlighted five from different ends of the yield curve that scaled to new highs in the latest trading session. These are iShares U.S. Treasury Bond ETF (GOVT – Free Report), iShares 20+ Year Treasury Bond ETF (TLT – Free Report), iShares 10-20 Year Treasury Bond ETF (TLH – Free Report), iShares 7-10 Year Treasury Bond ETF (IEF – Free Report) and Schwab Short-Term U.S. Treasury ETF (SCHO – Free Report). Expectations of rate cuts have been bolstered by continued signs of cooling inflation. The Consumer Price Index rose 2.5% year over year in August, down from the annual rise of 2.9% in July. This is the fifth straight annual drop and marks the slowest pace of annual growth since February 2021. Following the CPI report, investors’ bets for a 25-bps rate cut rose to 85% from 66% a prior day, as measured by the CME Fed Watch Tool.The bouts of recent data suggest that the U.S. economy is slowing down, leading investors to seek refuge in Treasury securities, perceived as safe-haven assets. The United States created 142,000 jobs in August, lower than the 160,000 anticipated by economists. Prior month job growth was also revised lower, indicating signs of continued cooling in the labor market. Further, volatility is expected to continue in the weeks ahead, given geopolitical tensions and the looming November elections.Let’s delve deeper into the abovementioned ETFs:iShares U.S. Treasury Bond ETF – 52-Week High: $23.65iShares U.S. Treasury Bond ETF offers exposure to the broad U.S. Treasury market with treasuries ranging from 1-30-year maturities by tracking the ICE U.S. Treasury Core Bond Index. With AUM of $28 billion, it holds 201 bonds in its basket with a weighted maturity of 7.81 years and an effective duration of 6.09 years. iShares U.S. Treasury Bond ETF charges investors 5 bps in fees per year and trades in an average daily volume of 13.2 million shares. It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.iShares 20+ Year Treasury Bond ETF – 52-Week High: $101.24iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Years Bond Index. It holds 46 securities in its basket and charges 15 bps in annual fees. iShares 20+ Year Treasury Bond ETF has an average maturity of 25.69 years and an effective duration of 16.91 years. TLT is one of the most popular and liquid ETFs in the bond space, with AUM of $63.1 billion and has a Zacks ETF Rank #4 with a High risk outlook.iShares 10-20 Year Treasury Bond ETF – 52-Week High: $111.51iShares 10-20 Year Treasury Bond ETF offers exposure to longer-term U.S. Treasury bonds and follows the ICE US Treasury 10-20 Year Bond Index. iShares 10-20 Year Treasury Bond ETF holds 56 bonds in its basket, with average maturity and effective duration coming in at 17.28 years and 12.88 years, respectively. iShares 10-20 Year Treasury Bond ETF has accumulated $8.4 billion in its asset base. It charges 15 bps in annual fees and has a Zacks ETF Rank #4 with a High risk outlook. iShares 7-10 Year Treasury Bond ETF – 52-Week High: $99.15iShares 7-10 Year Treasury Bond ETF targets mid-cap U.S. Treasury bonds and tracks the ICE US Treasury 7-10 Year Index. With AUM of $32.5 billion, iShares 7-10 Year Treasury Bond ETF holds 15 bonds in its basket with a weighted maturity of 8.56 years and an effective duration of 7.27 years. iShares 7-10 Year Treasury Bond ETF charges investors 15 bps in fees per and has a Zacks ETF Rank #4 with a High risk outlook.Schwab Short-Term U.S. Treasury ETF – 52-Week High: $48.97Schwab Short-Term U.S. Treasury ETF offers exposure to publicly issued U.S. Treasury securities that have a remaining maturity of greater than or equal to one year and less than three years, are rated investment grade, and have $300 million or more of outstanding face value. SCHO follows the Bloomberg US Treasury 1-3 Year Index and holds 97 securities in its basket with an average maturity of 1.98 years and an effective duration of 1.88 years. Schwab Short-Term U.S. Treasury ETF has AUM of $11 billion and charges 3 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.More By This Author:Navigate The September Swoon With These Low Volatility ETFsSector ETFs Set To Explode As Fed Rate Cut Bets Gain SteamDefensive ETFs Shine Amid A Rough Start To September

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