Taking Advantage Of Price Movements With U.S. Treasury ETFs

by: Kris Rymer

The domestic Treasury market, some could argue, has been one of the most overbought markets over the last couple of years. Yet investors continue to buy Treasuries whether it be for technical or fundamental reasons.

With the 5-year Treasury yield at 0.80% it is difficult to imagine how the price of Treasuries can climb even further - but it is possible. The iShares Lehman 3-7 Year Treasury ETF (IEI) in increased nearly 6.5% in 2011, and does not appear to be reversing its trend.

Here are some ETFs available to take advantage of price movements on the intermediate-term portion of the Treasury curve:

  • (NYSEARCA:FIVZ) PIMCO 3-7 Year US Treasury Index Fund
  • (SCHR) Schwab Intermediate-Term US Treasury ETF
  • (ITE) SPDR Barclays Intermediate Term Treasury ETF
  • (VGIT) Vanguard Intermediate Term Goverment Bond ETF
  • (NYSEARCA:IEI) Barclays 3-7 Year Treasury Bond Fund

The ETFs listed above will provide you with exposure to the intermediate-term of the Treasury yield curve, typically between three and 10 years maturity. These ETFs are relatively cheap as well compared with other ETFs. The range of expense ratios for these funds are between 0.12% and 0.15%.

More direct exposure to Treasury prices and yields also exists at the Chicago Board of Trade (CBOT) through the use of futures contracts. The interest rate products at the CBOT allow you to gain exposure to US Treasuries, Eurodollars and interest rate swap yields. However, for any investor, as you can see there are many ETFs to suit every investor's needs.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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