This Treasury ETF Has Doubled Last Month's S&P 500 Returns: What's Going On In The Bond Market?
Portfolio Pulse from Piero Cingari
The PIMCO 25 Year Zero Coupon U.S. Treasury Index ETF (ZROZ) has outperformed the S&P 500, represented by the SPDR S&P 500 ETF Trust (SPY), over the past month. ZROZ, which invests in long-term U.S. Treasury bonds with at least 25 years to maturity, saw a 19.4% return compared to SPY's 9.9%. The performance is attributed to falling Treasury yields, which benefit long-duration assets like ZROZ's zero-coupon bonds. A decrease in yields from 5.1% to 4.4% has led to a price increase in these bonds.
December 01, 2023 | 9:43 pm
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POSITIVE IMPACT
ZROZ has seen a significant increase in value due to falling Treasury yields, with a 19.4% return over the past month. The ETF benefits from lower interest rates as it holds long-term zero-coupon U.S. Treasury bonds.
ZROZ's performance is directly tied to the movement of long-term Treasury yields. With the recent decrease in yields, the ETF's long-duration assets have appreciated in value, leading to its outperformance. The trend is likely to continue in the short term if expectations of Fed rate cuts persist.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100
NEUTRAL IMPACT
SPY posted a 9.9% gain over the last month, which is less than half of ZROZ's return in the same period. SPY's performance is reflective of the broader stock market and may be influenced by different factors than ZROZ.
While SPY's performance is solid, it is not as directly impacted by the falling Treasury yields as ZROZ. SPY's movements are more correlated with the overall stock market performance and a multitude of other factors, including corporate earnings and economic indicators.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 50