Best & Worst Fixed Income ETFs Of The Year

December 16, 2016

Roller-Coaster Ride For Fixed-Income ETFs

For investors in Treasury ETFs, it's been a roller-coaster ride—first with the big rally in bond prices (and decline in yields) and then the big plunge in bond prices (and rise in yields).

A chart of the Pimco 25+ Year Zero Coupon US Treasury Index ETF (ZROZ) tells the tale. With a weighted-average maturity of 27.3 years and no coupon payments, ZROZ is among the most-interest-rate sensitive ETFs on the market. At one point this year, it was up more than 30%. By Wednesday, it was down 1.5% on a year-to-date basis, making it the seventh-worst-performing fixed-income ETF of the year.

YTD Return For ZROZ

The chart for many fixed-income ETFs is similar: a big jump followed by a big swoon. The Vanguard Extended Duration Treasury Index Fund (EDV), which also holds zero coupon bonds, started the year strong but was down 1.5% year-to-date on Dec. 14, making it the eighth-worst-performing fixed-income ETF of 2016.

Even outside of Treasury ETFs, the pattern repeats.

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