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As the U.S. Treasury Department announces its quarterly debt sale and prepares to launch its first debt buyback program since 2002, investors are taking a closer look at treasury securities. With the Federal Reserve expected to slow its run-off of U.S. government securities holdings, the pressure on the Treasury is expected to ease, making this an opportune time to consider investing in treasuries.
For those new to the world of treasury securities, it’s essential to understand the differences between the various types:
Treasury Bonds: These are long-term securities with maturities of more than 20 years, offering fixed interest payments semi-annually and the face value at maturity.
Treasury Notes: Issued with maturities ranging from 2 to 10 years, these securities also provide fixed interest payments semi-annually and the face value upon maturity.
Treasury Bills (T-Bills): Short-term securities with maturities of less than one year, T-Bills are sold at a discount from their face value and do not pay interest before maturity.
If you want to capitalize on the current treasury market without the hassle of navigating individual securities, exchange-traded funds (ETFs) offer a convenient and diversified solution. Here are three Treasury ETFs to consider:
iShares U.S. Treasury Bond ETF (BATS:GOVT)
GOVT offers broad exposure to 181 treasuries, with maturities ranging from less than one year to more than 20 years. With a low expense ratio of 0.05% and over $25 billion in assets under management, this ETF is a cost-effective and popular choice for investors seeking maximum diversification in their treasury holdings.
Global X 1-3 Month T-Bill ETF (NYSE:CLIP)
For those prioritizing safety in a rising-rate environment, CLIP focuses on the short end of the yield curve by investing in T-Bills with maturities between 1 and 3 months. With a competitive 6.8% yield to maturity and a duration of only 0.1 year, this ETF offers an attractive combination of yield and low interest rate sensitivity.
iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT)
Investors looking to protect against a market crash or recession may find TLT appealing. With an effective duration of 16.9 years, this ETF could see significant price upside if interest rates were to be cut. Additionally, its low five-year correlation of 0.19 with the broader market makes it a potential hedge against market downturns.
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Still Not Sure About Treasuries? Take A Look At These Alternative High-Yield Investments
While treasury securities can be an excellent addition to a diversified portfolio, some investors may prefer alternative high-yield investments. Two options worth considering are the Cityfunds Yield Fund and the EquityMultiple Ascent Income Fund.
The Cityfunds Yield Fund targets an 8% annual percentage yield (APY) by investing in a diversified pool of collateralized real estate loans. With a guaranteed minimum yield of 7% and quarterly distributions, this fund offers an attractive opportunity for income-focused investors to gain exposure to the real estate debt market.
EquityMultiple’s Ascent Income Fund, on the other hand, aims to provide investors with diversified exposure to U.S. commercial real estate loans, targeting a net return of 12%. By focusing on first-lien debt investments across various geographies, property types and borrowers, the fund seeks to mitigate risk while delivering stable returns. Investors can benefit from quarterly income distributions or choose to reinvest dividends for compounding returns.
Whether you’re ready to “T-Bill and chill” or prefer alternative high-yield investments, there are numerous options available to suit your investment goals and risk tolerance. By understanding the different types of treasury securities and the ETFs that provide exposure to them, you can make informed decisions and build a diversified portfolio tailored to your needs.
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This article Ready To T-Bill And Chill? 3 ETFs To Take The Guesswork Out Of Buying Treasuries originally appeared on Benzinga.com
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