Bond Market Sell-Off: History Says These 3 ETFs Are Brilliant Buys Right Now
Higher bond yields can be the start of better long-term returns. BND, IEF, and TIP offer three ways to pursue that opportunity.
When bond prices decline, bond yields rise, presenting investors with an opportunity to secure higher income. This concept is illustrated by three bond ETFs that each offer a distinct approach to this market dynamic. The 10-year Treasury note, for example, has seen a 6% to 7% price drop, resulting in a yield increase from 4.19% to approximately 5.01%. Higher yields attract income-oriented investors and have historically correlated with positive multi-year returns.
The Vanguard Total Bond Market ETF (BND) provides broad exposure to a wide range of bonds, including U.S. government, corporate, and mortgage-backed debt. With a low expense ratio of 0.03%, BND is an affordable option for investors seeking diversification and steady income. However, BND's moderate yield may not satisfy those desiring higher income.
The iShares 7–10 Year Treasury Bond ETF (IEF) focuses on U.S. Treasury debt with maturities between 7 and 10 years, offering a yield of 4.99%. Its low expense ratio of 0.15% makes it suitable for investors prioritizing moderate cash flow and minimal credit risk. IEF's performance hinges on stable interest rates and economic growth, while rising rates could negatively impact returns.
The iShares TIPS Bond ETF (TIP) invests in Treasury inflation-protected securities (TIPS), which adjust their principal in response to inflation. With a higher expense ratio of 0.18% and a yield of 5.56%, TIP appeals to investors prioritizing inflation protection and moderate yield. Given their unique characteristics and strategies, investors should select the ETF that best aligns with their investment objectives and time horizon.
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