With the end of the year rapidly approaching, it’s time again to consider tax-loss harvesting opportunities. So, it may be an opportune time for investors to consider where they can best capture potential tax benefits. Considering long-dated Treasuries’ performance over the last two years, one option is U.S. Treasury ETFs.
Treasury ETFs maintain U.S. Treasury exposure while realizing losses for tax purposes. They offer stable duration exposure, so investors can target any spot on the yield curve with greater precision.
Tax loss harvesting involves investors selling investments at a loss to offset gains and reduce their tax liability. The investor uses the money from the sale to buy an investment that fills a similar role in the portfolio.
By realizing losses, they can minimize capital gains taxes and potentially lower their overall taxable income. This helps optimize portfolios for tax efficiency and improve after-tax returns.
Tax Loss Harvesting With BondBloxx U.S. Treasury ETFs
BondBloxx offers a suite of eight duration-specific U.S. Treasury ETFs that range in duration from six months to 20 years. They track a series of indexes that include duration-constrained subsets of U.S. Treasuries with more than $300 billion outstanding. They’re designed to track indexes that achieve target durations using U.S. Treasury securities instead of specific maturities or maturity ranges.
The ICE US Treasury 7-10 Year Index is down 4.5% year-to-date as of Oct. 31 and down 18% over the last two years. So, investors with exposure to intermediate Treasuries may want to sell their existing positions and reinvest that capital elsewhere.
There are a couple of options. One is the BondBloxx Bloomberg Seven Year Target Duration US Treasury ETF (XSVN ). The other is the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN ).
Meanwhile, the ICE US Treasury 10-20 Year Bond Index is down 11% YTD and down 32% over the last two years. Plus, the ICE US Treasury 20+ Year Index is down 14% YTD and down 40% over the last two years.
For investors further out along the curve, they can sell their losing positions and reinvest in XTEN or the BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY ).
BondBloxx was launched in October of 2021 to provide precision ETF exposure for fixed income investors. It launched its first ETFs In February 2022. Now, BondBloxx manages more than $2 billion in assets across 20 U.S.-listed ETFs.
For more news, information, and analysis, visit the US Treasuries & TIPS Fixed Income Channel.