SPLB - BLV: Not Yet Time For This Long Duration Bond Fund

2024-01-30 21:07:50 ET

Summary

• The Vanguard Long-Term Bond Index Fund ETF Shares is a fixed income ETF with the highest duration among its peers.
• BLV has underperformed in the past three years due to rising interest rates and its high duration.
• The fund has a 50% Treasuries / 50% Corporate Bonds composition and a long portfolio duration of 14.1 years.
• The fund holds over 38% of its collateral in bonds maturing 25 years or longer.
• BLV is an instrument with a high sensitivity to spread duration, and the current low spreads for BBB corporate bonds do not represent a good entry point.

Thesis

The Vanguard Long-Term Bond Index Fund ETF Shares ( BLV ) is a fixed income exchange traded fund. We have covered a couple of names in this space, the last one being the SPDR Portfolio Long Term Corporate Bond ETF ( SPLB ) covered here . BLV is composed of treasuries and corporate bonds and has the longest duration from the analyzed cohort, duration which stands at 14.1 years. Long duration equates to a higher volatility level, but to the potential for higher returns as well once long rates move significantly lower. ...

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