iShares 0-3 Month Treasury Bond ETF

SGOV

Valor de mercado US$ 115 bi

Bonds are paying the best yields in years and still dragging portfolios into the red, leaving investors scrambling for a defensive asset that actually defends. A growing group of Wall Street managers thinks the answer involves shorting Treasuries outright.

U.S. bond yields are rising, providing an increasingly attractive alternative to pricey stocks. Trump's unorthodox policy may be causing this trend to accelerate.

US Treasury yields may ‌have further room to rise, with the Federal Reserve likely ​to deliver one or ​two more rate increases before ⁠the current tightening cycle ends, ​Dan Ivascyn, chief investment officer ​at the world's largest bond manager, told Reuters on Tuesday.

I rate SGOV (iShares 0-3 Month Treasury Bond ETF) a Buy for cash needed within 12 months, and TLT (iShares 20+ Year Treasury Bond ETF) a Hold. TLT's 5.7% yield is attractive, but its extra income only offsets about 11 bps of long yield increases over 12 months. SGOV offers nearly 4% yield with minimal price volatility, making it preferable for short-term needs amid rate uncertainty.

The global competition for capital remains the key dynamic keeping yields elevated. Notably, all of the September increase in 10-year Treasury yields came from real yields, as implied by the TIPS market.

US Treasuries resumed their retreat, lifting the 30-year yield back to its highest since 2002 as climbing oil prices raised concern about faster inflation and more central bank interest-rate increases. Vishal Khanduja, Head of Broad Markets Fixed Income at Morgan Stanley Investment Management, discusses credit spreads and whether or not yields will soon peak.

If I were 65 today, I'd construct a simple three-ETF portfolio focused on income, inflation protection, and risk mitigation. Alerian MLP ETF delivers a 7.8% yield as the primary income generator, leveraging energy infrastructure's stability and macro tailwinds. Schwab U.S. Dividend Equity ETF provides inflation-beating dividend growth and core equity diversification with a low 0.06% expense ratio.

Japan, Europe, and the U.S. were feeling the fallout from France, where yields on its benchmark 10-year note climbed closer to 5%, the highest since 2002.

Investor sentiment and credit markets suggest defensive positioning is at levels not seen in years. Popular safe-haven assets come with a hidden cost that could hurt investors if the bearish signals prove wrong. 2 covered call ETFs that I discuss in this article offer a compelling middle ground between high income and downside resilience.

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