Market volatility isn’t isolating itself to stocks. The bond market has had its fair share of fluctuations. However, global investment firms like UBS still recommend quality options like Treasuries.
“Growing volatility and rising uncertainty have added new risks to quality bond sectors,” dividend.com explained. “Yields are all over the place, and prices have changed on a dime.”
Despite this, given the volatility, quality bonds are still the prime option. This is ideal in the current market environment where heavy volatility can be countered by quality bonds that can absorb any forthcoming market shocks. Of course, with interest rates still relatively high, fixed income seekers can still lock in favorable yields.
“Offering steady income, diversification benefits, and better long-term returns than other safe-haven assets, quality bonds are still a great choice for the core of a fixed income portfolio,” fividend.com added. It noted UBS mentioned “the 10-year (yield) is still at highs not seen since 2008.” That is ideal because “studies show that starting yields explain more than 90% of the expected future return with regard to bonds.”
3 Treasury Options from Vanguard
With Treasury options in mind, Vanguard has three to consider. Each fund comes with a low expense ratio of 0.03%. That allows investors in today’s market to get exposure at a low cost.
Interest rates are in flux amid potential rate cuts or more holding. So investors might consider mitigating rate risk and locking in current with short-term notes. More specifically, get all-encompassing short-term exposure with the Vanguard Short-Term Treasury ETF (VGSH ). The fund’s holdings contain notes with maturity dates that fall within one to three years.
For a median option for investors looking to mitigate risk and extract more yield, there’s the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT ). This fund uses an indexing investment approach designed to track the performance of the Bloomberg U.S. Treasury 3-10 Year Bond Index. This index includes fixed income securities issued by the U.S. Treasury (excluding inflation-protected bonds) with maturities between three and 10 years.
For those fixated on yield and don’t mind the rate risk, there’s the Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT ). It 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. It includes fixed income securities issued by the U.S. Treasury (excluding inflation-protected bonds) with maturities greater than 10 years.
For more news, information, and analysis, visit the Fixed Income Channel.
