SGOV & TLT: A Tale Of Two ETFs And The Duration Trade
The highly anticipated 'duration trade' in long bonds like TLT has underperformed despite the Fed lowering rates by 100bp since their peak. TLT's price hasn't rebounded as expected because its yield hasn't shifted enough, even though short-term rates have declined. In fact, YoY, long rates have risen! I've consistently favored the short end of the curve, particularly the SGOV ETF, which has provided reliable returns during this period. I continue to endorse it moving forward.
WEEK Vs. SGOV: Choice Between Weekly Distributions Or Higher Yield/Lower Fees
Roundhill Weekly T-Bill ETF offers weekly income from 13-week T-bills, but charges a high 0.19% fee, making WEEK less cost-effective. iShares® 0-3 Month Treasury Bond ETF provides similar ultra-short Treasury exposure with a lower fee and monthly payouts, tracking an index passively. For investors who can look past the extremely short history for a weekly payout, the WEEK ETF gets a Buy rating. For others, I stick with the SGOV ETF.
SGOV Looks Attractive, But Upcoming Rate Cuts Should Deteriorate Income Opportunity
SGOV has been a reliable income generator, but its yield is declining, making it less attractive compared to TLT with more upside potential. The Fed's likely rate cuts in 2025 will further reduce SGOV's yield, while TLT could benefit from rising bond prices in a lower-rate environment. SGOV's dividend income has dropped from over 5% to 4.37%, and longer-duration bonds like TLT offer better prospects as rates decline.
SGOV: Cash For The Crash
The iShares 0-3 Month Treasury Bond ETF (SGOV) is a safe cash alternative with a current yield of 4.20%, ideal for conservative investors. SGOV offers higher yields than money market funds, despite slight risks due to government credit ratings and potential price volatility. With expected market volatility and stable yields, now is a strategic time to hold cash in SGOV, ready for future investment opportunities.
SGOV ETF: The Short End Of The Yield Curve Remains Attractive
SGOV, with a 4.20% SEC 30-Day Yield, remains attractive amid economic uncertainty. SGOV becomes a hedge in times like this, as MOVE and EPU indices surge. Compared to the long end of the curve, it offers lower yields, but the spread isn't significant enough yet to justify a shift.
SGOV: Short-Term Treasuries Remain Attractive Amidst Persistent Uncertainty
The iShares 0-3 Month Treasury Bond ETF (SGOV) offers an attractive 4.21% SEC yield with minimal risk, outperforming the 10-year Treasury in recent returns. Inflation trends and bond market volatility are crucial; high inflation could push long-term yields higher, while controlled inflation may lower short-term rates. Geopolitical risks, particularly U.S.-China tensions and potential tariff escalations, add layers of economic uncertainty, impacting global supply chains and inflation.
SGOV Vs. SHV: 3 Reasons Why I Use SGOV To Park Cash
SGOV and SHV can appear interchangeable for many investors as cash replacement - for good reasons. However, a closer examination leads me to prefer SGOV for this purpose. For the purpose of parking cash, I ideally want an ETF with no fees, zero price volatility, and maximum yield.
SGOV: We Can Still 'T-Bill & Chill'
My previous short term SGOV trade recommendation was a poor choice in hindsight. The S&P rally began shortly after that call. US equities remain massively overvalued, with the Buffett Indicator showing stocks priced more than double the size of the economy and a historically low dividend yield. The emergence of DeepSeek-R1 challenges the AI capex growth narrative, potentially impacting high-cost LLM monetization models from US businesses like OpenAI.
Why I Exited SGOV And Considering TLT As An Alternative To Some Of My Cash
I am downgrading SGOV from bullish to neutral due to anticipated declining yields as the Fed continues to cut rates. SGOV has been a strong cash proxy, but its yield is expected to fall below 4% by year-end, making it less attractive. I am shifting my focus to TLT, which I believe will outperform SGOV as long-term bond yields increase and the Fed lowers rates.
The Argument For SGOV Over CDs (Rating Upgrade)
I am upgrading SGOV to a "strong buy" due to its better trade-offs for cash compared to CDs, given the current rate environment. SGOV offers stability and liquidity, with a FWD yield of 5.10%, making it a preferable option over CDs amid fluctuating rates. CDs present reinvestment risks, especially if rates drop significantly; SGOV mitigates this risk with its flexibility and liquidity.
SGOV: Especially Useful For Uncertain Times
The economic and rate outlook is getting increasingly more uncertain, and short-term bonds look like a solid option in such an environment. iShares 0-3 Month Treasury Bond ETF is one of the best options among short-term treasury ETFs. I give SGOV a "Buy" rating.
SGOV: Rate Cuts, Short Maturity Treasuries, And A Normalizing Yield Curve
SGOV's appeal has diminished due to anticipated Federal Reserve rate cuts, which will likely reduce the fund's distribution. SGOV's stability and low volatility make it a safe cash equivalent, but its future returns are limited by declining interest rates. Broader bond funds like PIMCO's BOND offer better return potential by capitalizing on declining interest rates and longer-term maturities.
