The yield for the two-year Treasury note surged to its highest level in 16 years after a surprisingly strong jobs report. With yields soaring to record levels, investors may want to look into Treasury ETFs.
Private sector jobs rose by 497,000 in June, according to the ADP National Employment Report. That’s well above the 267,000 increase in May and the 220,000 that economists had projected.
Following the report, investors sold off stocks in fear that the Federal Reserve will continue raising interest rates. In turn, the benchmark two-year yield rose above 5%, its highest level since 2007.
See more: ETF 360: BondBloxx’s Joanna Gallegos on Fixed Income
“The move in yields underscored a growing consensus that the Fed will have to resume raising rates in July after pausing its tightening campaign in June for the first time in more than a year,” according to the Financial Times.
Comerica Wealth Management CIO John Lynch is quoted in CNBC as saying that the number “was more than double expectations, that really ratchets up the fear factor that the Fed would have to be more aggressive.”
A Low-Cost, Precision Duration Treasury ETF
Investors looking to take advantage of these record-high yields may want to consider the BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO ). XTWO targets U.S. Treasuries that have an average duration of approximately two years. It carries an expense ratio of 0.03%.
“Our XTWO ETF is a low-cost, precision duration fund that can enable investors to take advantage of the recent high in U.S. Treasury yields following today’s strong jobs report,” said JoAnne Bianco, a partner of BondBloxx Investment Management.
XTWO is one of eight duration-specific U.S. Treasury ETFs that BondBloxx Investment Management offers. 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.
For more news, information, and analysis, visit the Institutional Income Strategies Channel.
