This time a year ago, the 60/40 portfolio was presumed dead. But now, investors baffled about what to do about the stock market this year are talking about buying short-maturity Treasuries. After all, the two-year Treasury got right up against a 5% yield last week, the highest it’s been since 2007. So, many investors are thinking, why try to figure out the stock market when you can get almost 5% for two years risk-free?
Speaking with Bob Pisani on CNBC’s “Halftime Report,” BondBloxx Investment Management co-founder Joanna Gallegos said, “The reason bonds are back is because yields are back.”
“There was a tremendous shift in yields last year that was historic,” Gallegos said, citing the Federal Reserve raising its benchmark overnight interest rate by 425 basis points over the course of last year.
“What it means for everyday portfolios and everyday investors is that cash needs to be addressed,” she explained. “The things that are on the sidelines, anything that people haven’t been allocating towards the U.S. Treasury space should now consider doing that.”
However, Gallegos noted, “Although bonds are back, investors aren’t taking action, and they’re not reallocating.”
Most of the eight duration-specific U.S. Treasury ETFs from BondBloxx have seen inflows year-to-date. The BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF) has thus far brought in more than $81 million in investor capital, while the BondBloxx Bloomberg One Year Target Duration US Treasury ETF (XONE) brought in $67 million, and the BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO) brought in $49 million.
Meanwhile, even the firm’s more long-term Treasury funds, the BondBloxx Bloomberg Five Year Target Duration US Treasury ETF (XFIV), the BondBloxx Bloomberg Seven Year Target Duration US Treasury ETF (XSVN), and the BondBloxx Bloomberg Twenty Year Target Duration US Treasury ETF (XTWY) brought in nearly $15 million, $5 million, and $4 million, respectively, in investor money year-to-date.
These duration-specific Treasury ETFs seek to offer investors a more precise, lower-cost way to get exposure to U.S. Treasury Securities. They 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.
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