Vanguard launches short-term US Treasury bond ETF

Sep 7th, 2020 | By | Category: Fixed Income

Vanguard has launched a new fixed income ETF in Europe providing exposure to Treasury bonds at the short end of the maturity spectrum.

Matthew Piro, Head of Portfolio Review Department, Europe, at Vanguard

Matthew Piro, Head of Portfolio Review Department, Europe, at Vanguard.

The Vanguard US Treasury 0-1 Year Bond UCITS ETF (VDST LN) has listed on the London Stock Exchange in US dollars and comes seeded with $2.5m in assets.

The fund is linked to the Bloomberg Barclays Short Treasury Index which consists of US Treasury bills, notes, and bonds with remaining maturities between one month and one year.

Fixed-rate and original zero-coupon bonds are eligible for inclusion, while STRIPS, floating-rate bonds, and Treasury inflation-protected securities are excluded.

Constituents are weighted by market value, and the index is reconstituted and rebalanced on a monthly basis.

The ETF comes with an expense ratio of 0.07% which matches the cost of Vanguard’s other sovereign bond ETFs which provide broad maturity exposure to US, UK, and eurozone government fixed income markets.

Matthew Piro, Head of Portfolio Review Department, Europe, at Vanguard, commented, “Vanguard believes investors have the best chance of investment success through putting together broadly diversified, balanced portfolios and holding them for the long-term. As investors have increasingly voted with their feet in favour of low-cost investment products, we have seen growing and increasingly global demand for our equity and fixed income UCITS ETF range.

“In particular, investors worldwide value the transparency and regulatory oversight that the UCITS regime provides. The Vanguard US Treasury 0-1 Year Bond UCITS ETF is an important addition to our UCITS ETF range, and another part of the puzzle in helping to meet the evolving needs of long-term investors across many countries.”

While Vanguard is well-known for its low-cost passive products, several ETF providers have been fiercely competing in the core portfolio space in recent years. Both Invesco and Amundi offer cheaper ETFs (as measured by TER) that target US Treasuries – in terms of the short-term segment, these include the Invesco US Treasury Bond 0-1 Year UCITS ETF (TREI LN) and Amundi Prime US Treasury Bond 0-1Y UCITS ETF (PR1T GY) which cost 0.06% and 0.05%, respectively.

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