Sep. 4 at 2:27 PM
Since long-term Treasury yields peaked in early July, there has been a notable difference in bond ETF returns. Two factors explain it: duration and credit quality.
📊 The iShares Broad USD High Yield Corporate Bond ETF's (
$USHY) short duration has protected it. USHY has an effective duration of 2.98 years — roughly a 3% price change per percentage point rate move. That shorter duration has helped it weather the summer drawdown much better than long-Treasury holders.
📉 Long-duration Treasuries have been hit hardest. The iShares 20+ Year Treasury Bond ETF (
$TLT) has an effective duration of roughly 15 years, meaning a 15% price change for every percentage point move in interest rates. That leverage cuts both ways — and since July, it's cut against holders.
For individual bondholders: you have a guaranteed return until maturity or call. For bond ETF holders: your returns will fluctuate with the bond market. https://www.aaii.com/investor-update/article/538933-the-impact-of-rising-yields-on-bond-etfs
#Investing #AAII #FixedIncome