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37 votes

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

I read an article about this very issue in January 2023, and I saved the graphic that illustrates the historical relationship between the S&P 500 as an indicator for equities and the 10-year U.S. ...
MTA's user avatar
  • 1,499
28 votes
Accepted

If US Treasuries at yielding 4-5% right now, why can't I find an ETF that yields that amount?

Over the last 12 months, SGOV yielded 1.84%, but the current SEC yield (30 days ending on the last day of last month) is 4.41%. If you want to know what a fund or ETF yielded most recently, look at ...
Stan H's user avatar
  • 7,551
16 votes

Do bond funds have an inherent advantage over individual bonds within a portfolio?

Your main advantage is diversification. As an individual investor it can be hard to just buy individual bonds. The bond market is targeted towards institutional investors with larger portfolios. Many ...
Manziel's user avatar
  • 7,442
12 votes

Do bond funds have an inherent advantage over individual bonds within a portfolio?

I am considering investing the entire bond component in the individual bond A special risk-free savings bond with slightly higher yield than the bond ETF above (for the same duration as the bond ETF)....
base64's user avatar
  • 10.5k
12 votes

If US Treasuries at yielding 4-5% right now, why can't I find an ETF that yields that amount?

The average yield to maturity of SGOV is 4.41%. The 2% is the 12-month trailing yield. From https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf: Note that the average yield ...
Franck Dernoncourt's user avatar
10 votes
Accepted

Why would an ETF tracking UK government bonds be losing money?

In general, when interest rates rise, the value of existing bonds declines. If you hold an existing bond paying, say, 2% and interest rates rise so that new bonds of the same type pay 4%, your ...
Justin Cave's user avatar
  • 27.3k
10 votes

Why does the yield on SHY (US treasury bond ETF) seem so bad?

Both answer given so far by @0xFEE1DEAD and @Kevin Arlin are correct. I'll just add some concrete numbers. The average coupon (weighted by market value of the bonds) of SHY ETF is currently ~2.36%. ...
AKdemy's user avatar
  • 2,902
10 votes

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

For perfectly hedged investments the investments would be perfectly anti-correlated, i.e. if the value of investment A goes down, the value of investment B goes up an equivalent amount, and visa versa....
Charles E. Grant's user avatar
9 votes
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What does DIST refer to in this equity ETF?

"Dist" is short for "Distributing" and means that income from the underlying instruments is distributed to holders of the ETF every so often. For bond funds this income would be interest or "coupons" ...
GS - Apologise to Monica's user avatar
9 votes

Why are bond ETFs typically recommended for diversifying into bonds?

You mention that a diversified bond ETF 'has no known maturity date' and thus 'perpetually takes on interest rate risk.' This is partially true. You then say "This looks highly speculative to me.&...
Grade 'Eh' Bacon's user avatar
8 votes
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Pros and cons of bond ETF versus traditional bond mutual fund?

Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies ...
OneTruDragonGirl's user avatar
8 votes

Why does the yield on SHY (US treasury bond ETF) seem so bad?

I'm pretty sure it's as simple as that it takes some time for holdings to turn over. The Fed only first hiked rates in March, and the March and May hikes were not the big 75 bp hikes we've seen since. ...
Kevin Arlin's user avatar
8 votes
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Questions about bond ETF

Bond ETFs are not bets on individual bonds, they are bets on interest rates (or credit spreads in the case of non-government bond ETFs). They will reinvest capital as bonds mature, and may even sell ...
D Stanley's user avatar
  • 137k
7 votes

Why does the yield on SHY (US treasury bond ETF) seem so bad?

As of 11/23, the "30 Day SEC Yield" is 4.45%, whereas the backward looking"12m Trailing Yield" (TTM) is only 0.92% https://www.ishares.com/us/products/239452/SHY -- Edit -- ...
0xFEE1DEAD's user avatar
  • 8,498
6 votes

Bond ETFs as a means to achieve risk parity

This is an old question that has been bumped because of an edit, but there's one point that I think was overlooked: The "high risk" you're seeing for a bond ETF is comparing the risk of that ...
D Stanley's user avatar
  • 137k
6 votes

Does buying bonds individually offer an advantage over bond funds/ETFs in a low interest rate environment because bonds can be held to maturity?

I wrote about this a while back, and it boils down to risk profile. If you hold the bond to maturity, then you minimize your capital risk: if you bought a $1,000 bond, once it matures, you are ...
tendim's user avatar
  • 433
6 votes
Accepted

When are bond ETF dividends taxed?

Is this tax withheld before the dividend is paid out to the investor? Only if you've been naughty. https://www.irs.gov/taxtopics/tc307 Topic Number: 307 - Backup Withholding When it applies, backup ...
RonJohn's user avatar
  • 50.7k
6 votes
Accepted

Criteria for selecting Bond ETFs

I handle bonds similar to how I do stocks, which is to say I assume the rest of the market knows more than me, so I pick the cheapest, most generic index funds available. Just like I don't overweight ...
Craig W's user avatar
  • 15.9k
6 votes

Understanding bond ETFs

Bonds can be bought and sold prior to maturity. If you download the holdings of an ETF from the manager's website, it will often include the prices of the bonds the fund holds. The price depends ...
Charles Fox's user avatar
  • 2,779
5 votes
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Are bond index funds a safe way to save for a mortgage down payment?

Bonds are great because you get that guaranteed return, ignoring defaults. You buy $1,000 of tomorrow money for $990 today. Bond funds, are different. Bond funds constantly transact bonds within ...
quid's user avatar
  • 49k
4 votes

Criteria for selecting Bond ETFs

I've been doing some research on this, and found a great answer on a Bogleheads forum: I think the value of bond diversification is frequently over-estimated by simple (and flawed) analogy with ...
minou's user avatar
  • 7,536
4 votes

Understanding bond ETFs

When I sell my share of ETF, the ETF gets the cash by selling the shares it owns. Is this the right thinking? No. Selling your ETF shares is just like selling any other security. They are ...
Bob Baerker's user avatar
  • 76.7k
4 votes

What determines the price of fixed income ETFs?

The literal answer to your question 'what determines the price of an ETF' is 'the market'; it is whatever price a buyer is willing to pay and a seller is willing to accept. But if the market price of ...
dave_thompson_085's user avatar
4 votes
Accepted

Tax in Germany on ETF, government bonds, stocks

AFAIK, the Kapitalertragsteuer doesn't distinguish different types of capital gains, so, yes, all the same. That being said, there may be differences with ETFs (you may have to pay withholdings on ...
cbeleites unhappy with SX's user avatar
4 votes

Why oughtn't corporate bond ETFs (with credit rating ≥ BBB) replace government bond ETFs?

Why oughtn't corporate bond ETFs (with credit rating ≥ BBB) replace government bond ETFs? Because BBB bonds (on the S&P scale) are near the bottom of investment grade bonds, while Canadian ...
RonJohn's user avatar
  • 50.7k
4 votes

Why are bond ETFs typically recommended for diversifying into bonds?

Granularity A single bond has quite a high face value. This may not matter for the institutional investor but makes it problematic for the average Joe who just may not have enough money invested to ...
Manziel's user avatar
  • 7,442
4 votes

Do bond funds have an inherent advantage over individual bonds within a portfolio?

(This answer is US-centric. I don't know about other countries' bond markets.) In other words, do bond funds have an inherent advantage over individual bonds within a periodically rebalanced ...
RonJohn's user avatar
  • 50.7k
4 votes
Accepted

What does the Bloomberg US Treasury Long Term TR index measure?

Index are a way to measure the return of a basket of instruments. For an equity index it's naturally a basket of stocks. For a bond index it's a basket of various bonds. A total return bond index's ...
D Stanley's user avatar
  • 137k
3 votes
Accepted

What is the appeal of this Ultrashort Bond ETF with 3B net assets but no returns nor dividends?

Based on the prospectus - it is supposed to distribute income, but there apparently has not been any income to distribute - probably because short-term government interest rates in EUR have been ...
D Stanley's user avatar
  • 137k
3 votes

Are there Bond ETF’s that don’t go down?

The thing you're wanting to avoid, which you called "interest rate risk", has the formal name of duration risk. It's actually calculated as (effective duration * interest rate volatility), but it's ...
Ben Voigt's user avatar
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