Advisors: Are You Being Deceived by the Bond Market?

Advisors: Are You Being Deceived by the Bond Market?

The 10-year yield is not the whole story.

Reviewed by: Lisa Barr
Edited by: Ron Day

Financial advisors and investors who looked at the U.S. Treasury yield curve or the yield on their bond ETFs this week may have seen something unexpected. 

For all the attention and drama surrounding the benchmark 10-year bond reaching its highest yield (4.34%) since 2007, an additional fact went unnoticed: The 10-year bond has the lowest yield in the entire Treasury curve.

That is, bonds maturing in less than and more than 10 years, from the shortest-term T-bills to the 30-year U.S. government bond, yield more than the 10-year Treasury. For advisors, this means the bargains they might be waiting for, based on monitoring the 10-year bond, are already available in slightly shorter and longer maturities.  

The historically challenging months September and October lie ahead. Advisors and investors looking to add bond exposure, while also feeling they’re fully allocated to T-bills and other “cash equivalents,” can use this time to reacquaint themselves with a part of the investment universe they may have had little contact with over the past 15 years.  

Bond ETFs for a Potentially Challenging Time 

Using’s ETF Screening Tool, I was able to identify 69 ETFs that meet the criteria “Fixed Income/Investment Grade/Intermediate-Term maturity,” and are not inverse ETFs (which bet against segments of the bond market).  

What’s clear is that after nearly 20 months of consistently rising rates, ETFs in this range finally offer yields that advisors don’t have to be embarrassed to bring up in conversation. 

Some of the ETFs on the list target a range of maturities, and others target a specific duration (a measure of how sensitive a bond is to interest rate changes) or even a single maturity year. The other key decision is the allocation among U.S. Treasuries and bonds with some amount of “credit risk” such as corporate bonds. 


A few samples from the list to start one’s research include the Vanguard Intermediate Term Treasury Index ETF (VGIT), which has $16 billion in assets. It holds bonds between three to 10 years to maturity. Its duration checks in at just over five years.  

The FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT), a 12-year-old ETF with $1.9 billion in assets, offers a shorter duration (three years), and the twist of investing in Treasury inflation-protected bonds. It does so by focusing on TIPS with maturities of under five years. The yield on TIPS hit its highest point since 2009 on Monday.  

While this unique segment of the intermediate-term bond market requires some additional homework, with rates across the board having seen a lift, this would seem to be a good time to go to school on TIPS. 

Some of the most notable developments in the growth of ETF vehicles are those that confine themselves to owning only bonds that mature in a specific year. For example, the Invesco BulletShares 2026 Corporate Bond ETF (BSCQ) owns 389 bonds that all have one thing in common:  They all mature during the year 2026.  

According to the ETF’s prospectus, on the last day of that year, it will “unwind and return all capital to shareholders.” So, it acts a lot like owning individual bonds that mature. BSCQ takes on a noticeable level of credit risk, albeit for a relatively small number of years. Its portfolio’s average credit rating is BBB, with most of its holdings rated at level or in the A category. 

The 10-year US Treasury gets all the attention these days. But ETF investors hunting for yield in a new era for bond investing have a wide number of alternatives to T-bills and the benchmark 10-year government bond. 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.