Treasury ETFs Hit New Highs As Coronavirus Fears Spread

The fixed income space has been enjoying huge rally lately on increased demand for safe havens. The rise in number of coronavirus cases worldwide has raised fears of pandemic that would derail the global economic growth.

In particular, a growing number of companies have warned that the outbreak will prevent them from meeting sales or profit targets for the first three months of the year. Reduced demand for goods and services and factory closures in China are also expected to hurt global growth and weigh on trade at a time when Japan and Germany are already teetering on the brink of recession.

Per International Monetary Fund, the virus outbreak could reduce global economic growth by 0.1% this year. Goldman now expects the U.S. economy to grow just 1.2% in the first quarter, down from 2.1% in the fourth quarter and 2.3% in full-year 2019. The risk-off sentiments have reduced yields. Notably, the yields on the 10-year U.S. Treasury note fell to an all-time low of 1.31%.

The combination of factors, including moderating economic growth and weaker inflation expectations, has led to decline in rates.

As such, long-term Treasury bond ETFs have been hitting new all-time highs. The trend is likely to continue, at least for the near term, given the deepening virus-related worries. Below, we have profiled five ETFs that hit a 52-week high in the latest trading session. These funds have a Zacks ETF Rank #3 (Hold).

PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) — New High: $157.80

This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 21 securities in its basket. Both effective maturity and effective duration of the fund are 27.32 years. This fund has a decent level of $383.8 million in AUM and a light average daily volume of 44,000 shares. It charges 15 basis points (bps) in annual fees.

Vanguard Extended Duration Treasury ETF (EDV - Free Report) — New High: $151.71

This fund provides exposure to the long-term Treasury STRIPS market by tracking the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. It holds 82 bonds with average maturity of 25.1 years and average duration of 24.2 years. Expense ratio comes in at 0.07%. The product has amassed $1.4 billion in its asset base and has a good volume of 180,000 shares per day on average.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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