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Bond ETF - Overview & Comparisons Of Liquid Bond ETFs

With bond yields trading near record lows the Bond ETF is one of the most heavily traded ETF classes. At the bottom of most of these charts you can see how dramatically trading volume has grown over the past 5 years. Since there are several classes of bonds and a wide number of durations it makes sense that there would need to be a large number of ETFs to cover the investment spectrum. Also, with the investor flight to safety that has occurred since the 2008-2009 stock crash there has been high demand for fixed income investments.

On this site I will examine several of the most liquid Bond ETFs from Long Term, Short Term, Corporate and High Yield Bonds as well as Leveraged and Inverse Bond ETF funds.

TLT - iShares 20+ Year Treasury Bond ETF was among the first to come on the scene and quickly established itself as the 800 lb gorilla of Bond ETFs. Based on the Barclays Capital U.S. 20+ Year Treasury Bond index and invests at least 90% of it's assets in the bonds of the underlying index and at least 95% of it's assets in U.S. Goverment issues including up to 5% in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents. 

As of 9/20/2010 had an average daily trading volume of 6,950,960 which is one of the most actively traded Bond ETF contracts and has net assets of $3.35 Billion. The annual total expense ratio is .15% (15 Basis Points).

TLT Price Performance Since Inception

This chart begins on Jan 1st 2003 - Official inception date was July 22, 2002

BLV - Vanguard Long Term Bond Index Fund is also a long term bond fund that tracks a market weighted index of long term bonds with average duration of 15-30 years. Slightly less than 1/2 the fund is in Aaa rated Treasuries with the balance spread out among Baa-Aa paper in primarily Financials, Industrials and Foreign holdings. Due to the lesser credit quality the current yield is about 70+ basis points higher than TLT (4.52% vs 3.78%).

Average trading volume as of 9/20/2010 was 79,000 with net assets of about $372 million. The annual total expense ratio is .12% (12 Basis Points) which in Vanguard tradition is among the lowest in the class.

You can see by the chart below BLV has a strong correlation with TLT but has slightly underperformed since inception of the fund with dramatic underperformance during the height of the credit crisis.

BLV Performance Since Inception VS TLT

 
Chart begins on BLV inception date 4/3/2007.

TIP ETF

TIP - iShares Barclays TIPS Bond ETF seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S.Treasury Inflation Protected Securities (TIPS) index.  Established 12/4/2003 it has been around nearly as long as TLT

The annual expense ratio is .20% (20 basis points) which is slightly higher than TLT.  As of 9/20/2010 net assets were $20.55 Billion much larger than TLT and the average daily trading volume was 676,981 making it a very liquid bond etf.

TIP Performance Since Inception VS TLT

Chart begins on first trading day of TIP 12/4/2003

TLT | BLV | UBT | TMF | SHY | CSJ | PST | TBF | TBT | TMV | LQD | HYG | JNK | TIP