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We have combined short-term Treasury Bond ETFs with intermediate term issues. Short-term issues provide what might pass as safe-parking given the shorter duration of bonds in the relevant index. These bonds are continually rolled-over to maintain the character of the index. Investors compromise lower yields for the short duration protection. At the same time given low prevailing current yields fees then become more of an issue. In the following list our choices include both low fees matched by greater liquidity and comparable yields.6

Higher yields are available with intermediate bonds. In fact most fixed rate mortgages are priced off 10-year Treasury Bonds. Nevertheless investors seeking higher yield with more duration risk will find something that fits the bill for them.

While current Fed policies favor keeping interest rates low for an "extended period" bond vigilantes as they're known will dictate actual price and yield policy as determined in the market place. The Fed may engage in more QE (Quantitative Easing) which may entail buying mortgage-backed securities in the open market thus managing yields through more money printing. As long as bond vigilantes remain subdued and accepting of the power of the printing press, lower yields will continue. Eventually the music will stop and yields must rise once again.

It's ironic given recent downgrades by S&P and a negative outlook for U.S. credit ratings by Moody's that bond yields have barely budged. This may be the result of many factors including: aging demographics in the U.S. favoring fixed income investments; the relationship between the U.S. and overseas trading partners; a distrust of equity markets by many investors; overseas investors not trusting eurozone bond issues; and, institutions having few alternative choices given their investment mandates. Bond prices currently have seen some profit-taking in 2012 after seeing excellent overall returns in 2011. Should equity markets rally significantly in the future bond markets could perform less well given their historical inverse relationship.

We look at 10 different bond ETF issues including those that are repetitive varying only slightly by holdings and perhaps more so by varying embedded fees and expenses.

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge or speculate, leveraged long and inverse issues are available to utilize from ProShares.


#10: Vanguard Intermediate Treasury ETF (VGIT)

VGIT follows the Barclays Capital U.S. 3-10 Year Government Index which include income securities issued by the U.S. Treasury (not including inflation-protected bonds) and U.S. government agencies and instrumentalities, as well as corporate or dollar-denominated foreign debt guaranteed by the U.S. government, with maturities between 3 and 10 years. The fund was launched in November 2009. The expense ratio is .15%.

AUM equal $104 M and average daily trading volume is 16.7K shares. As April 2012 the annual dividend yield was 1.58% and YTD return was -0.15%. The one year return was 8.74%.

Data as of April 2012

VGIT Top Ten Holdings & Weightings

  1. US Treasury Note 3.625%: 2.79%
  2. US Treasury Note 3.625%: 2.45%
  3. US Treasury Note 2%: 2.34%
  4. US Treasury Note 3.125%: 2.25%
  5. US Treasury Note 2.125%: 2.15%
  6. US Treasury Note 3.125%: 2.12%
  7. US Treasury Note 2.25%: 2.10%
  8. US Treasury Note 2.625%: 2.10%
  9. US Treasury Note 3.375%: 2.08%
  10. US Treasury Note 3.5%: 1.81%

#9: PIMCO 3-7 Year U.S. Treasury ETF (NYSEARCA:FIVZ)

FIVZ follows the BofA Merrill Lynch 3-7 Year US Treasury Index which is an unmanaged index that tracks the performance of the direct Sovereign debt of the U.S. Government with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 3 years and less than 7 years. It is not possible to invest directly in an unmanaged index. The fund was launched in October 2009.

AUM equal $21M and average daily trading volume is low at 2K shares. (Be careful with market orders.) As of April 2012 the annual dividend yield was 1.15% and YTD return -0.18%. The one year return was 7.05%.

Data as of April 2012

FIVZ Top Ten Holdings & Weightings

  1. US Treasury Bond 10.625%: 8.66%
  2. US Treasury Note 2.375%: 7.57%
  3. US Treasury Bond 7.25%: 6.50%
  4. US Treasury Note 3.25%: 5.40%
  5. US Treasury Note 3.125%: 5.36%
  6. US Treasury Note 1.875%: 5.36%
  7. US Treasury Note 3.25%: 5.34%
  8. US Treasury Note 3%: 5.32%
  9. US Treasury Note 3.125%: 5.17%
  10. US Treasury Note 4.125%: 4.82%

#8: iShares Barclays 1-3 Year Treasury Bond ETF (SHY)

SHY follows the Barclays Capital U.S. 1-3 Year Treasury Bond Index. The fund was launched in July 2002. The expense ratio is .15%. AUM equal $10.3M and an average daily trading volume was 1.6M shares.

As of April 2012 the annual dividend was yield was .58% and YTD return -0.11%. The one year return was 1.09%.

Data as of April 2012

SHY Top Ten Holdings & Weightings

  1. US Treasury Note 1.25%: 11.30%
  2. US Treasury Note 0.25%: 8.50%
  3. US Treasury Note 1.75%: 7.08%
  4. US Treasury Note 2.25%: 6.77%
  5. US Treasury Note 1%: 4.70%
  6. US Treasury Note 0.75%: 4.42%
  7. US Treasury Note 1.75%: 4.42%
  8. US Treasury Note 2.375%: 4.33%
  9. US Treasury Note 0.75%: 3.54%
  10. US Treasury Note 2.375%: 2.91%

#7: Vanguard Short-Term U.S. Treasury ETF (VGSH)

VGSH follows the Barclays Capital U.S. 1-3 Year Government Bond Index This Index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected securities) and U.S. government agencies and instrumentalities, as well as corporate or dollar-denominated foreign debt guaranteed by the U.S. government, all with maturities between 1 and 3 years. The fund was launched in November 2009.

The expense ratio is .15%. AUM equal $167 million and average daily trading volume is 20K shares. As of April 2012 the annual dividend yield was 0.64% and the YTD return was -0.08%. The one year return was 1.09%.

Data as of April 2012

VGSH Top Ten Holdings & Weightings

  1. US Treasury Note 0.25%: 3.69%
  2. US Treasury Note 0.5%: 3.26%
  3. US Treasury Note 0.375%: 3.18%
  4. US Treasury Note 0.625%: 2.86%
  5. US Treasury Note 0.25%: 2.47%
  6. US Treasury Note 0.375%: 2.31%
  7. US Treasury Note 0.5%: 2.14%
  8. US Treasury Note 2.25%: 2.09%
  9. US Treasury Note 4.75%: 2.00%
  10. US Treasury Note 0.25%: 1.83%

#6: Schwab Short-Term U.S. Treasury ETF (SCHO)

SCHO follows the Barclays Capital U.S. 1-3 Year Treasury Bond Index which measures the performance of U.S. Treasury securities that have a remaining maturity of at least one year and less than three years. The fund was launched in August 2010. The expense ratio is .12%. AUM equal $181M and average daily trading volume was 42.8K shares.

As of April 2012 the annual dividend yield was 0.31% and YTD return was -0.12%. The one year return was 1.10%. Like all Schwab ETFs SCHO trades commission free for Schwab clients.

Data as of April 2012

SCHO Top Ten Holdings & Weightings

  1. US Treasury Note 0.25%: 4.56%
  2. US Treasury Note 1.125%: 4.34%
  3. US Treasury Note 0.375%: 4.31%
  4. US Treasury Note 1.75%: 4.20%
  5. US Treasury Note 0.25%: 4.13%
  6. US Treasury Note 0.5%: 4.12%
  7. US Treasury Note 3.125%: 4.09%
  8. US Treasury Note 1.25%: 4.04%
  9. US Treasury Note 1.875%: 3.74%
  10. US Treasury Note 2%: 3.48%

#5: PIMCO 1-3 Year Treasury ETF (TUZ)

TUZ follows the BofA Merrill Lynch 1-3 Year US Treasury Index which is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than three years. It is not possible to invest directly in an unmanaged index. The fund was launched in June 2009.

The expense ratio is .09%. AUM equal $137M and average daily trading volume is 19K shares. As of April 2012 the annual dividend yield was 0.55% and YTD return was -0.23%. The one year return was 0.86%.

Data as of April 2012

TUZ Top Ten Holdings & Weightings

  1. US Treasury Note 1.75%: 6.87%
  2. US Treasury Note 0.5%: 6.21%
  3. US Treasury Note 0.75%: 5.65%
  4. US Treasury Note 1%: 4.92%
  5. US Treasury Note 0.75%: 4.86%
  6. US Treasury Note 0.25%: 4.52%
  7. US Treasury Note 0.625%: 4.42%
  8. US Treasury Note 0.375%: 4.19%
  9. US Treasury Note 1.25%: 4.15%
  10. US Treasury Note 0.75%: 4.13%

#4: iShares Barclays Capital U.S. 7-10 Year Treasury Bond Index ETF (IEF)

IEF follows the index bearing the same name. The fund was launched in July 2002. The expense ratio is 0.15%. AUM equals $4.4M and daily trading volume is 853K shares per day.

As April 2012 the annual dividend yield was 1.89% and YTD return -0.55%. The one year return was 14.37%.

Data as of April 2012

IEF Top Ten Holdings & Weightings

  1. US Treasury Note 2.125%: 21.73%
  2. US Treasury Note 2.625%: 14.54%
  3. US Treasury Note 3.625%: 10.97%
  4. US Treasury Note 3.125%: 9.73%
  5. US Treasury Note 3.625%: 9.67%
  6. US Treasury Note 3.5%: 8.04%
  7. US Treasury Note 3.125%: 5.98%
  8. US Treasury Note 3.625%: 4.71%
  9. US Treasury Note 2%: 4.34%
  10. US Treasury Note 2.625%: 2.16%

#3: iShares 3-7 Year Treasury Bond ETF (IEI)

IEI follows the Barclays Capital U.S. 3-7 Year Treasury Bond Index which measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of more than three years and less than seven years. The fund was launched in January 2007. The expense ratio is .15%. AUM equal $2.2M and average daily trading volume is 206K shares.

As of April 2012 the annual dividend yield was 1.21% and YTD return was -0.02%. The one year return was 7.36%.

Data as of April 2012

IEI Top Ten Holdings & Weightings

  1. US Treasury Note 2.75%: 6.56%
  2. US Treasury Note 1.75%: 6.51%
  3. US Treasury Note 3.125%: 6.41%
  4. US Treasury Note 3.125%: 5.50%
  5. US Treasury Note 2.75%: 5.26%
  6. US Treasury Note 2.625%: 3.69%
  7. US Treasury Note 4.25%: 3.65%
  8. US Treasury Note 1.375%: 3.60%
  9. US Treasury Note 2.625%: 3.24%
  10. US Treasury Note 3.25%: 3.00%

#2: Schwab Intermediate Treasury ETF (SCHR)

SCHR follows the Barclays Capital U.S. 3-10 Year Treasury Bond Index which measures the performance of Treasuries with a maturity of more than three years and less than ten years. The fund was launched in August 2010. The expense ratio is .12%. AUM equal $144M and average daily trading volume is 38K shares.

As of April 2012 the annual dividend yield was 1.14% and YTD return was -0.30%. The one year return was 9.14%. Like all Schwab ETFs SCHR trades commission free for Schwab clients.

Data as of April 2012

SCHR Top Ten Holdings

  1. US Treasury Note 2%: 5.05%
  2. US Treasury Note 2.75%: 4.30%
  3. US Treasury Note 2.5%: 3.21%
  4. US Treasury Note 3.125%: 3.14%
  5. US Treasury Note 3.25%: 3.12%
  6. US Treasury Note 3.25%: 3.07%
  7. US Treasury Note 4.75%: 3.05%
  8. US Treasury Note 2.375%: 3.02%
  9. US Treasury Note 3.125%: 2.92%
  10. US Treasury Note 3%: 2.89%

#1: PIMCO 7-15 Year Treasury ETF (TENZ)

TENZ follows the BofA Merrill Lynch 7-15 Year US Treasury Index which is an unmanaged index that tracks the performance of the direct Sovereign debt of the U.S. Government with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 7 years and less than 15 years. The fund was launched in September 2009.

The expense ratio is .15%. AUM equal $22.8M and average daily trading volume is less than 4.5K shares. (Again, here you need to watch any market orders.) As of April 2012 the annual dividend yield was 1.72% and YTD return -0.36%. The one year return was 13.61%.

Data as of April 2012

TENZ Top Ten Holdings & Weightings

  1. US Treasury Note 3.375%: 12.83%
  2. US Treasury Note 3.625%: 11.76%
  3. US Treasury Bond 8.125%: 11.73%
  4. US Treasury Note 2.625%: 11.70%
  5. US Treasury Bond 8.75%: 9.75%
  6. US Treasury Bond 7.625%: 9.65%
  7. US Treasury Note 3.125%: 7.03%
  8. US Treasury Bond 6.25%: 6.43%
  9. US Treasury Bond 6%: 5.82%
  10. US Treasury Bond 6.5%: 4.48%


We rank the top 10 ETF by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

All bond ETFs were big winners in 2011 as investors fled stock markets for many reasons. Little noticed among these reasons were the growing number of baby boomers who would logically be seeking to reduce risk in their portfolios. The extraordinary volatility of 2011 hastened this exit and that generation may not be returning to markets any time soon. As we move along in 2012 we've seen some profit-taking in bonds and rotation back to equities. This changed again in early April as employment and global manufacturing data weakened. Further eurozone negativity also resurfaced which may remain with us for some time to come. These more recent conditions have led investors back to the perceived safe haven of bonds.

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may also become popular as they become seasoned.

(Source for data is from ETF sponsors and various ETF data providers)

Source: Top 10 U.S. Treasury Bond ETFs