Although this did not get too much attention, Ameristock listed five new bond ETFs that have been in the works for ages.
Ameristock/Ryan 1 Year (GKA)
Ameristock/Ryan 2 Year (GKB)
Ameristock/Ryan 5 Year (GKC)
Ameristock/Ryan 10 Year(GKD)
Ameristock/Ryan 20 Year(GKE)
These are unique for how they target very specific maturities across the entire curve and I am sure there will be some clever trading strategies with pair trades within the product line, pair trades with these fund combined with bond ETFs from other providers or ways to play changes in the shape of the yield curve.
I am not so sure these have much use for individual investors who want to maintain a bond portfolio. The issue here for me is that the interest will always be equal (give or take) to whatever that maturity is yielding in the market.
If the yield on the ten year was 6% and you thought that was pretty good you risk getting a lower rate with GKD if the yield in the market place goes down. That which might yield 6% today could yield 4% next year. If you buy an individual treasury your yield will be whatever it was when you bought it which I think makes managing this portion of your portfolio much easier.
Treasuries are very easy to trade in terms of access and liquidity. Anyone who can select a fund with a ten year maturity and select a bond with a ten year maturity too.
Wikinvest Wire
3 comments:
Hopefully these get big enough to be liquid, but not so big that they artificially inflate the prices on the on-the-run Treasury debt further. After all, look what the commodity funds did to the previously normal curve shapes in the futures markets. Commodity fund investors regularly get fleeced as the funds roll to the new front month contract. The same could happen in a more modest way as they try to keep a constant duration on the Treasury curve.
David Merkel
Alephblog.com
Can anyone explain to me the benefits of a bond fund/etf over a bond ladder, particularly in a rising interest rate environment? Like Roger pointed out, the yield is variable. It also seems like you'd always be losing money as the NAV reprices. Am I missing something?
And that makes 30, 2-yr bond ETFs! Just kidding, but feels that way.
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