Fixed Income: U.S. Government Treasury Long-Term

EDV Top Performer Intra-day
Price $120.71
Today’s Change +1.05%(0.88)
9:59am 08/18/2017
TLH Bottom Performer Intra-day
Price $138.06
Today’s Change +0.28%(0.21)
9:43am 08/18/2017
  • Overview
  • Efficiency
  • Tradability
  • Fit

ETF.com Insight

While one might expect homogenous coverage here, the ETFs in this segment offer very different exposures to long-term US government debt. True, all five funds uniformly invest in Treasurys,Each fund's definition of "long term" greatly affects its interest rate risk and therefore can’t differentiate themselves by their country, sector or credit allocations. However, each fund’s definition of “long term” greatly affects its interest rate risk as longer-dated bonds are more sensitive to interest rate changes. In addition, longer-dated bonds tend to offer higher yields to compensate for their higher risk.
TLO reflects the market most closely—it matches our benchmark’s 10-30 year maturity span. However, investors who want less interest rate risk may prefer TLH, which offers the shortest weighted average maturity and shortest effective duration due to its 10-20 year range. On the other hand, those who want more risk should consider TLT, which only holds bonds that mature in 20 or more years. EDV and ZROZ take on even more interest rate risk: Both portfolios are made up solely of zero-coupon bonds and offer the segment’s longest durations and highest yields. (EDV and ZROZ make quarterly distributions even though their underlying bonds don’t pay coupons.)
Expense ratios aren’t a huge differentiator in this segment—they range from 12 to 15 bps—but liquidity is. TLT is by far the most liquid ETF here, with a daily median volume that’s larger than each of its peers’ AUMs. The other funds are all tradable, but expect volumes all over $1M and spreads between 5 and 34 bps. Only TLT trades well in size, doubtlessly aided by its volume in the secondary market. (Insight updated 08/17/17)

All Funds (5)

TLO $581.18 M 581178824 Marketlike

A 97
E
96
96
T
93
93
F
97
97

TLT $6.99 B 6989226000 Best liquidity

A 90
E
96
96
T
99
99
F
90
90

TLH $507.93 M 507926010 Shorter maturity

A 70
E
96
96
T
92
92
F
70
70

EDV $608.68 M 608678500 Zero coupon bonds

B 66
E
78
78
T
89
89
F
66
66

ZROZ $179.13 M 179132000 Zero coupon bonds

C 61
E
73
73
T
86
86
F
61
61

ETF.com Grade as 08/10/17

Fixed Income: U.S. Government Treasury Long-Term

1 Year Total Return NAV
Performance  [as of 08/16/17] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: Bloomberg Barclays Long U.S. Treasury Index--------------
A 97.042283TLO581178824TLOSPDR Bloomberg Barclays Long Term Treasury ETF1.78%4.02%6.24%-7.33%4.40%3.09%7.05%
A 90.24988TLT6989226000TLTiShares 20+ Year Treasury Bond ETF1.78%4.12%6.69%-7.47%4.69%3.25%7.29%
A 69.981229TLH507926010TLHiShares 10-20 Year Treasury Bond ETF0.95%1.96%4.03%-4.25%3.22%2.41%6.19%
B 66.474901EDV608678500EDVVanguard Extended Duration Treasury ETF2.59%6.27%9.52%-10.48%6.11%4.29%--
C 60.875936ZROZ179132000ZROZPIMCO 25+ Year Zero Coupon US Treasury Index ETF2.88%6.65%9.25%-11.61%5.75%4.11%--
All returns over 1 year are annualized. All returns are total returns unless otherwise stated.

ETF.com Efficiency Insight

TLO, TLH and TLT win top honors in Efficiency for their reasonable expense ratios and tight tracking performances. That said, all five funds charge reasonable fees: The expense ratios heretracking error separates the best from the rest range from 12 to 15 bps. Rather, it is tracking error that separates the best from the rest.
EDV and ZROZ track their respective index well on a median basis but have shown significant variability. To put things in context, tracking volatilities can be a result of different timing and pricing sources in pricing NAVs and pricing indexes. Due to long duration, a small difference in prices can lead to a wide wedge between the fund and its index.
The funds in this segment are all well-established, with little to no risk of closure. TLT is by far the most popular, with more than $5B in AUM. TLH is the second largest fund, with over $300M, and the remaining three funds each has at least $50M. They are also, for the most part, managed well from a tax perspective. (Insight updated 08/17/17)

All Funds (5)

96
95.858982
96
95.70637
96
95.579282
78
77.646168
73
72.775441

ETF.com Grade as 08/10/17

Fixed Income: U.S. Government Treasury Long-Term

Tracking Difference (12 Month)

Ticker Expense Ratio Median Max. Upside Max. Downside Max LT/ST Cap Gains Rate Rule Legal Structure Fund Closure Risk Efficiency
EDV Vanguard Extended Duration Treasury ETF 0.07% -0.10% 1.05% -1.19% 20.00% / 39.60% Low 77.646168
TLH iShares 10-20 Year Treasury Bond ETF 0.15% -0.12% -0.07% -0.14% 20.00% / 39.60% Low 95.858982
TLO SPDR Bloomberg Barclays Long Term Treasury ETF 0.10% -0.12% -0.05% -0.34% 20.00% / 39.60% Low 95.579282
TLT iShares 20+ Year Treasury Bond ETF 0.15% -0.09% 0.01% -0.13% 20.00% / 39.60% Low 95.70637
ZROZ PIMCO 25+ Year Zero Coupon US Treasury Index ETF 0.15% -0.37% 1.05% -2.47% 20.00% / 39.60% Low 72.775441

ETF.com Tradability Insight

TLT is by far the most liquid ETF in its segment: The fund trades over $800M on most days and is among the most liquid US-listed ETFs on the market. TLT’s high daily volume isTLT is among the most liquid US-listed ETFs on the market accompanied by extremely tight spreads. Traders large and small should have no issue executing trades at fair prices.
The remaining ETFs aren’t nearly as liquid as TLT, but can still be traded fairly at the retail level with some effort. Although the average spreads range from TLH’s 5 bps to ZROZ’s 34 bps, none of the spreads should be prohibitive for longer term investors. Additionally, all four funds trade more than $1M on most days, leaving room to get in and out. Still, trading costs matter here given the similarity in the funds’ fees.
It is always a good idea to shop around for the best price or enlist the issuer’s capital markets desk for help finding the best execution for large orders. (Insight updated 08/17/17)

All Funds (5)

99
99.12
93
93.442297
92
91.688504
89
89.11807
86
85.75663

ETF.com Grade as 08/10/17

Fixed Income: U.S. Government Treasury Long-Term

Ticker Median Daily Volume ($) Average Spread Creation Unit/Day Market Hours Overlap Underlying Volume/Unit % Creation Cost Per Unit (%) Impediment to Creations Score - Tradability
EDV Vanguard Extended Duration Treasury ETF $4.99 M 0.19% 0.85 100.00% -- 0% None 89.11807
TLH iShares 10-20 Year Treasury Bond ETF $2.4 M 0.06% 0.18 100.00% -- 0.00% None 91.688504
TLO SPDR Bloomberg Barclays Long Term Treasury ETF $2.77 M 0.13% 0.39 100.00% -- 0.01% None 93.442297
TLT iShares 20+ Year Treasury Bond ETF $805.54 M 0.01% 63.79 100.00% -- 0% None 99.12
ZROZ PIMCO 25+ Year Zero Coupon US Treasury Index ETF $1.36 M 0.26% 0.24 100.00% -- 0.01% None 85.75663
Spread History
Premium/Discount History

ETF.com/ Block Liquidity

EDV
5
4
3
2
1
TLH
5
4
3
2
1
TLO
5
4
3
2
1
TLT
5
4
3
2
1
ZROZ
5
4
3
2
1

This measurement shows how easy it is to trade 25,000 shares of each ETF.

ETF.com Fit Insight

The five ETFs in this segment define “long-term” Treasurys differently, and thus hold different portfolios. TLO, like our benchmark, holds bonds that are due to mature in 10-30TLO captures the broad market best years. In contrast, TLH only holds bonds that mature in the next 10-20 years—a smaller slice of that market. The last three funds—TLT, EDV and ZROZ—only hold longer-dated bonds. TLT holds bonds expiring in at least 20 years; EDV holds Treasury STRIPS expiring in the next 20-30 years; and ZROZ holds zero-coupon bonds with remaining maturities of 25 years or more.
TLO captures the broad market the best, since it invests across the entire long-term Treasurys spectrum. In comparison, TLH has a much lower weighted average maturity: 14 years compared with TLO’s 25 years. Unsurprisingly, it also comes with a lower effective duration and lower yield.
TLT, EDV and ZROZ hold longer-term bonds, with higher durations and higher yields. TLT and ZROZ have the longest weighted average maturities, over 27 years, though EDV’s average maturity, at 25 years, is still high. However, ZROZ’s and EDV’s zero-coupon bond portfolios have much longer durations: 29 and 27 years, respectively, compared with TLT’s 18 years. ZROZ and EDV each have higher volatility than their coupon-paying peers—they soar when rates drop and crash when rates rise.
Presumably any investor in this space wants some level of interest rate risk, or at least is willing to bear it for the yield. The choice here boils down to how “long term” you want your long-term Treasury exposure to be and how much interest rate risk you’re willing to take on. (Insight updated 08/17/17)

All Funds (5)

97
97.042283
90
90.24988
70
69.981229
66
66.474901
61
60.875936

ETF.com Grade as 08/10/17

Fixed Income: U.S. Government Treasury Long-Term