Five New Bond ETFs, and Why They May Not Be for You

Roger Nusbaum submits: Although this did not get too much attention, Ameristock listed five new bond ETFs that have been in the works for ages.

Ameristock/Ryan 1 Year (GKA)
Ameristock/Ryan 2 Year (GKB)
Ameristock/Ryan 5 Year (GKC)
Ameristock/Ryan 10 Year (GKD)
Ameristock/Ryan 20 Year (GKE)

These are unique for how they target very specific maturities across the entire curve, and I am sure there will be some clever trading strategies with pair trades within the product line, pair trades with these funds combined with bond ETFs from other providers, or ways to play changes in the shape of the yield curve.

I am not so sure these have much use for individual investors who want to maintain a bond portfolio. The issue here for me is that the interest will always be equal (give or take) to whatever that maturity is yielding in the market.

If the yield on the ten year was 6% and you thought that was pretty good, you risk getting a lower rate with GKD if the yield in the marketplace goes down. That which might yield 6% today could yield 4% next year. If you buy an individual treasury, your yield will be whatever it was when you bought it -- which makes managing this portion of your portfolio much easier.

Treasuries are very easy to trade in terms of access and liquidity. Anyone who can select a fund with a ten-year maturity can select a bond with a ten-year maturity too.

Comments

[aludwin]

On a somewhat related note, a general question: How could one create an ETF portfolio that would track closely with the Lehman Global Aggregate Index? iShares offers Lehman Aggregate Index, but not global. Any ideas?

[RogerNusbaum]

I think this would require a willingness to explore CEFs, OEFs and individual issues but even then I am not sure.