3 Treasury ETFs Rising On Grexit Worries

Though the U.S. economy has been putting up a strong show in the second quarter of the year and the bourses have hit multi-year highs on several occasions, geopolitical threats related to the possibility of the Greek debt default have once again frozen the solid momentum. Investors too have taken a defensive mode on cue.

Treasury bond ETFs, which saw acute sell-offs to start June on chances of a sooner-than-expected Fed rate hike, have thus regained their sheen on a safe-haven appeal. This defensive mood has stemmed from the futile effort by Greece and its creditor to strike a bailout deal. This means Greece has neared the ill prospect of a debt default and the consequent compulsory way out from the Euro zone (read: Greek Debt Concerns Put GREK in Focus).

Greece is due for a $1.8 billion payment to IMF by the end of this month, per Reuters. The country’s creditors have asked for more austerities from Athens in exchange of a bailout, but Athens is yet to show any sign of compliance. The more the chance of ‘Grexit’ becomes prominent, the higher the demand for safe haven bids are rising (read: Save Haven and Volatility ETFs to Watch Amid Turmoil).

As a result, investors started to position themselves for the imminent volatility in the risky assets and started to park their money in the safer U.S. treasuries, despite Fed rate hike worries. Yields on the U.S. benchmark 10-year notes, which touched the 2.50% mark – the highest point of this year – on June 10, slipped to 2.39% the very next day.

As per the head of overseas investment at South Korea’s Government Employees Pension Service, yields on U.S. benchmark 10-year notes might fall below 2%, if Grexit shapes up. Given these woes, risk-averse investors are treading cautiously, while some are even dumping stocks and junk bonds in favor of treasuries to safeguard their portfolio from steep capital erosion.

Below we have highlighted three Treasury ETFs that hogged investors’ attention lately and added gains despite the looming rate hike concerns.

Vanguard Extended Duration Treasury ETF (EDV)

This fund provides exposure to the long-term Treasury STRIPS market by tracking the Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. The fund holds 72 bonds in total with effective maturity of 25.3 years and average duration of 24.9 years. Expense ratio came in at 0.12% (read: Treasury Bond ETFs Surge on Safe Haven Appeal).

The product has amassed $356 million in its asset base. Its yield was 3.11% annually as of June 12, 2015 and gains came in at 0.34% in the trailing five-day period (read: Best and Worst Bond ETFs Of 2014).

Pimco 7-15 Year U.S. Treasury Index Fund (TENZ)

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