The bad news is that yield on many fixed-income securities took it on the chin this year. The good news is that it means it was a good year for bond price appreciation. What follows is a list of the top 10 performing non-leveraged bond exchange-traded funds (in ascending order) in terms of price appreciation year to date, through November 22. An overarching theme here is that long-term bonds have been the place to be. And Treasury STRIPS, or Separate Trading of Registered Interest and Principal of Securities, have been especially rewarding.
10. VanEck Vectors CEF Municipal Income ETF (XMPT) - YTD return of 18.5%; SEC yield of 4.02%
This ETF tracks an index consisting of securities in four sectors of municipal closed-end funds: leveraged municipal fixed-income closed-end funds; unleveraged municipal fixed-income closed-end funds; leveraged high-yield municipal fixed-income closed-end funds and unleveraged high-yield municipal fixed-income closed-end funds. The index assigns a greater weight to CEFs trading at discounts, potentially enhancing yield and the opportunity for capital appreciation. The fund charges a net expense ratio of 1.86%, of which acquired fund fees and expenses account for 1.46%.
9. PIMCO 15+ Year U.S. TIPS Index Exchange-Traded Fund (LTPZ) - 19.3% YTD; 0.87% SEC yield
The fund aims to achieve the real return (above inflation), capital preservation and greater exposure to changes in real interest rates inherent in long maturity Treasury inflation protected securities (TIPS). Its underlying ICE BofAML 15+ Year U.S. Inflation-Linked Treasury Index comprises TIPS with a maturity of at least 15 years. The expense ratio is 0.20%.
8. Vanguard Long-Term Bond ETF (BLV) - 19.6% YTD; 3.03% SEC yield
BLV follows the performance of the Bloomberg Barclays U.S. Long Government/Credit Float Adjusted Index that includes all medium and larger issues of U.S. government, investment-grade corporate and investment-grade international dollar-denominated bonds with maturities greater than 10 years. This low-cost product costs 0.07%.
7. iShares Core 10+ Year USD Bond ETF (ILTB) - 20.2% YTD; 3.27% SEC yield
This passively managed fund invests in U.S. dollar-denominated bonds rated either investment grade or high-yield with remaining maturities greater than 10 years.
6. iShares Long-Term Corporate Bond ETF (IGLB) - 21.9% YTD; 3.69% SEC yield
Similar in many ways to its previously mentioned sister fund from iShares, this product invests in U.S. dollar-denominated investment-grade corporate bonds with remaining maturities greater than 10 years. Both this fund and ILTB have expense ratios of 0.06%.
5. SPDR Portfolio Long Term Corporate Bond ETF (SPLB) - 22.3% YTD; 3.65% SEC yield
SPLB consists of corporate bonds with maturities of 10 years or more. The index includes investment-grade, fixed-rate and taxable U.S. dollar-denominated debt with $300 million of par outstanding, and is market-cap weighted and reconstituted on the last business day of the month. The fee is 0.07%.
4. Vanguard Long-Term Corporate Bond ETF (VCLT) - 22.6% YTD; 3.62% SEC yield
Seeks to provide a high and sustainable level of current income by investing mainly in investment-grade corporate bonds. It maintains a dollar-weighted average maturity of 10 to 25 years.
3. FlexShares Credit-Scored US Long Corporate Bond Index Fund (LKOR) - 22.7% YTD; 3.29% SEC yield
This fund’s index identifies a universe of bonds with maturities of 10 years or more, assesses the current financial state of U.S. issuers based on a proprietary credit score model, and optimizes exposure to the credit score while maintaining market-like duration and spread. It charges an expense ratio of 0.22%.
2. Vanguard Extended Duration Treasury ETF (EDV) - 23.3% YTD; 2.25% SEC yield
This fund tracks the Bloomberg Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index that includes zero-coupon U.S. Treasury securities known as Separate Trading of Registered Interest and Principal of Securities, or STRIPS. These securities are the final principal payments of U.S. Treasurys that have been stripped of their interest, or coupons. STRIPS have long-term maturities, making them quite sensitive to changes in interest rates. As such, they are often used as a directional bet on interest rate movements. Like all three Vanguard funds on this top 10 list, this product’s expense ratio is 0.07%.
1. PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund (ZROZ) - 26.8% YTD; 2.15% SEC yield
The underlying ICE BofAML Long US Treasury Principal STRIPS Index comprises long-maturity STRIPS, representing the final principal payment of U.S. Treasury bonds. This fund’s effective maturity and effective duration both are 27.32 years. It comes with an expense ratio of 0.15%.
