iShares Debuts Long-Term STRIPS ETF

STRIPS are very sensitive to interest rate changes. 

Today, in addition to a group of ESG funds, iShares rolled out a long-term Treasury STRIPS ETF. The iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ) invests in securities derived from Treasury bonds.

GOVZ comes with an expense ratio of 0.07% and lists on Cboe Global Markets, the parent company of ETF.com.

Zero coupon bonds are very sensitive to interest rates, which can be appealing to investors. A brokerage firm takes a bond with at least 10 years of maturity and separates it out (“strips it”) into distinct securities that can be sold individually, one for each coupon payment from the original bond, plus the bond itself.

According to the prospectus, securities eligible to be included in the underlying index must have at least 25 years remaining maturity, while the  U.S. Treasury bonds from which they were stripped must have at least $1 billion in outstanding face value. The index included 20 securities as of mid-September.

GOVZ will compete with the nearly $2 billion Vanguard Extended Duration Treasury ETF (EDV), which invests in 20- to 30-year Treasury STRIPS and also comes with an expense ratio of 0.07%. It launched in late 2007.

Contact Heather Bell at [email protected]