Just a handful of long-term bond funds are cheap to own for a brief interval.
If you want to make a bet on declining interest rates, shares in a fund that owns long-term bonds are a good option. This table ranks exchange-traded long-term bond funds on their three-month holding costs.
The obvious choice is the iShares 20+ Year Treasury Bond Fund (TLT). The fund’s portfolio has an average maturity of 26 years and makes a big move up or down in value when rates go, respectively, down or up. We calculate that holding TLT for three months will cost you $4.66 per $10,000 invested.
|3-month Holding Cost*|
|Diversified and corporate|
|CLY||iShares 10+ Year Credit Bond||$5.67||B|
|SPLB||SPDR Portfolio Long Term Corp Bd||6.54||B|
|VCLT||Vanguard Long-Term Corporate Bd||6.96||B|
|TLT||iShares 20+ Year Treasury Bond||4.66||A+|
|SPTL||SPDR Portfolio Long Term Treasury||5.99||B|
|TLH||iShares 10-20 Year Treasury Bond||6.95||B|
|BLV||Vanguard Long-Term Bond||8.14||B|
|EDV||Vanguard Extended Duration Trs||9.16||B|
|VGLT||Vanguard Long-Term Treasury||9.83||B|
*Cost of a $10,000 position held for three months. Reflects bid/ask spread, expense ratio and cost offset from securities lending.
Data sources: Morningstar, Bloomberg, fund distributors
TLT’s strong showing here reflects, in part, a high trading volume that keeps the bid/ask spread tight. But, with an expense ratio of 0.15% annually, TLT is less compelling as a long-term investment. In the ranking of long-term bond ETFs for ten-year holding costs, SPDR Portfolio Long Term Treasury (SPTL) beats TLT by a mile. See Best ETFs: Long-Term Bonds.
For links to the three-month rankings in other categories, see Best ETFs for Trading.