Tag: ETF bond

While fears of a looming recession persist, treasury ETFs could provide the portfolios with a cushion against any economic downturns. With most treasuries yielding around 5%, BondBloxx, which offers eight duration-specific U.S. Treasury ETFs, could be a helpful instrument. BondBloxx, hailed as “innovative” in fixed-income ETF provision, currently manages over $2 billion across 20 U.S-listed ETFs.

The Vanguard Short-Term Corporate Bond Index ETF (VCSH) provides diversified exposure to short-term, investment-grade corporate bonds. Despite being a solid investment, VCSH is slightly less diversified and riskier than other ETFs like Janus Henderson AAA CLO ETF (JAAA). While it offers a higher income, VCSH underperforms in comparison to JAAA, which offers stronger dividends, higher credit quality, and lower interest rate risk. The investment decision hinges on future Federal Reserve policy actions.

The US Treasury 12 Month Bill ETF (OBIL) allows investors to access T-Bills without having a Treasury account, offering stable returns and high liquidity through a focus on the 12-month T-Bill. OBIL mirrors the yield performance of the ICE BofA US 12-Month Treasury Bill Index, rolling into the latest issue each month. It carries no credit risk, but potential investors should be aware of the interest rate risk and lack of diversification due to its single asset focus.

Fixed income ETF demand in 2023 has been dominated by Treasury ETFs, with a solid performance from alternatives like collateralized loan obligations (CLOs). CLO investment, offering attractive yields and strong risk profiles, is securitized, predominantly senior secured loans with good creditworthiness. The largest CLO-focused ETFs, such as Janus Henderson AAA CLO ETF and VanEck CLO ETF, have seen a significant increase in assets and growth rate.

PIMCO’s economic forecast for the next 6-12 months predicts slowing growth, slowing inflation, and a potential mild recession. Based on this, the firm emphasizes diversification, quality, and precaution, strongly favoring fixed income in their multi-asset portfolios. They maintain a neutral position on equities. The equity risk premium is at its lowest in over 20 years, suggesting bonds offer better opportunities than equities. Within equities, PIMCO prefers themes and sectors with growth potential, such as semiconductors and renewable energy.

DWS has introduced a set of four target-maturity fixed income ETFs in Europe, each with a management fee of 0.12%. These ETFs acquire bonds with specific maturity years (2027, 2029, 2031, and 2033), holding them to maturity. They help investors manage duration exposure and enable portfolio customization to meet specific cash requirements. The ETFs meet EU’s Sustainable Finance Disclosure Regulation, excluding companies involved in certain controversial sectors.