Looking for More Risk, Duration in Your Fixed Income?

Treasury yields started off the trading week by ticking lower, but more yield can be had with greater risk and the Vanguard Extended Duration Treasury Index Fund ETF Shares (EDV) . A scramble toward safe-haven bonds took place, putting downward pressure on yields and upward momentum for bond prices. “Treasury yields dropped to start the week after economic data pointed to a slowdown in growth, while rising concerns about the delta coronavirus variant made investors flock to safe-haven bonds,” a CNBC article said. “The yield on the benchmark 10-year Treasury note fell 8 basis points to 1.15%.

Source: Looking for More Risk, Duration in Your Fixed Income?

The yield on the 30-year Treasury bond dipped 5 basis points to 1.836%. Yields move inversely to prices.  One basis point equals 0.01%.”

Per the fund description, EDV seeks to track the performance of an index of extended-duration zero-coupon U.S. Treasury securities. The fund employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index.

This index includes zero-coupon U.S. Treasury securities (Treasury STRIPS), which are backed by the full faith and credit of the U.S. government, with maturities ranging from 20 to 30 years. The fund invests by sampling the index. At least 80% of its assets will be invested in U.S. Treasury securities held in the index.

Highlights of EDV:

  • Seeks to track the performance of the Bloomberg Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index.
  • Is passively managed using index sampling.
  • Provides current income with high credit quality.

Manufacturing Data and Inflation Weigh In

Other factors that may affect the movement of yields this week include manufacturing data. Manufacturing metrics provide key indicators on the pace of economic recovery.

“The U.S. manufacturing sector kept expanding in July, but at a slower pace than a month ago. The July Manufacturing PMI registered 59.5% a decrease of 1.1 percentage points from the June reading of 60.6 percent, according to the Institute for Supply Management,” the CNBC report noted.

Of course, it’s difficult to get away from the pulse of the economy without discussing inflation these days.

“Concerns about inflation also plagued the market, however, a key inflation indicator showed lesser-than-feared price pressures on Friday,” the report added. “The core personal consumption expenditures price index rose 3.5% in June year over year. It marked a sharp acceleration in inflation, but came in slightly below a Dow Jones forecast of a 3.6% jump.”

For more news, information, and strategy, visit the Fixed Income Channel.

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