ETF Talk: In Long-Term Bonds We Trust… Especially with This ETF

Religion, politics and money are three rather gauche topics for mixed company.

However, as you all know by now, I am not one to shy away from heady topics or a bit of friendly fire to keep things lively. I say this, because I will briefly touch on all three of these topics, starting with a bit of a religion-related history fact.

In 1955, President Dwight D. Eisenhower mandated that the phrase “In God We Trust” be printed on all U.S. currency. Dating back to the Civil War, that phrase was used to convey to the world what America stood for, especially during a time of war, with the religious fortitude of its concerned citizens.

While this may no longer be the common sentiment, it is still part of our history — as is politics. Thankfully, this discussion is not centered on politics themselves, but more the Fed, its impending rate cuts and the likely re-emergence of the “don’t fight the fed” rallying cry amongst financial professionals. So, as religion and politics fluctuate, money does as well.

In a monetary sense, investors are looking for a way to protect their portfolios from the risk of stagnation in stocks and commodities — while also locking in gains. Now that we’ve touched on the three “untouchables,” lets get to the heart of the matter — long-term bonds and one fund in particular: iShares Core 10+ Year USD Bond ETF (ILTB).

Unlike stocks, bonds are a loan to a company or government, and as such they are likely to be less volatile, which is something many investors are craving right now — with both inflation and Fed action up in the air.

ILTB, in particular, covers a broad spectrum of long-dated USD-denominated bonds with at least 10 years remaining in maturity. The fund includes U.S. Treasurys, government-related bonds (U.S. and non-U.S.), investment-grade and high-yield corporate bonds and emerging-market bonds. The fund allocates roughly the same amount of stake to both corporate and government bonds. Geographically, this fund does not discriminate and offers exposure to U.S., developed-market and emerging-market issuers.

The fund has $604.21 million in net assets, $603.91 million in assets under management and an incredibly reasonable expense ratio of 0.06%. To further whet interested-investor appetite, ILTB offers a dividend yield of 4.72% and paid $2.37 per share in the past year. Its dividend is paid every month, and its last ex-dividend date was July 1, 2024.

As shown in the chart above, ILTB has seen some incredible movement since November of 2023. Though it hit a bit of a downturn in late April, it immediately picked itself up. Since its last trading day, Monday, July 8, the fund’s price gained 0.159% and rose from $50.22 to $50.30 — giving it four days of continued gains.

Tuesday’s price action fluctuated down slightly, but the fund has the volume and liquidity to continue gaining in the days and weeks to come. According to stockinvest.us, the ETF is expected to rise 3.86% during the next three months and, with a 90% probability, hold a price between $50.91 and $53.33 at the end of this three-month period.

The fund’s top 10 holdings include United States Treasury, 42.53%; AT&T, Inc., 0.79%; Mexico (United Mexican States) (Government), 0.74%; Comcast Corporation 0.67%; Oracle Corporation, 0.63%; UnitedHealth Group, Inc., 0.61%; Verizon Communications, Inc., 0.61%; Bank of America Corp., 0.56%; Saudi Arabia (Kingdom Of), 0.56%; and Apple, Inc., 0.56%.

In sum, it is in long-term bonds we trust. And it is in iShares Core 10+ Year USD Bond ETF (ILTB) where we potentially invest.

So, as long as sentiment around religion, politics and money fluctuate — stability can never be underestimated. And ILTB may be just the answer interested investors are looking for, with its solid liquidity, low expense ratio and enviable dividend yield.

So, in true Renaissance fashion, I started with a bit of history, and I will end with a bit of it as well. The 1809 Austrian statesman, and minister of foreign affairs, Klemens von Metternich, championed conservatism, helped in the victorious alliance against Napoleon I and restored Austria as a leading European power. So, as someone who was likely well-versed in fluctuating sentiment, this tidbit he offered up is still quite powerful: “Stability is not immobility.”

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.