PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund (ZROZ)
ZROZ: Simple Treasury STRIPs ETF, For Dovish Traders And Investors
The Federal Reserve is guiding for several cuts in the coming months. Significant rate cuts would almost certainly lead to higher bond prices. Most bond funds would benefit, some more than others. ZROZ would be one of the biggest beneficiaries.
ZROZ: Deflationary Bust Needed To Save Bonds
Bond supply is surging and will likely rise further in a recession, increasing market pressure. On our last coverage, we suggested that locking in 30-year rates near 4.2% seems risky given the supply outlook. But how do we feel about 5.05%?
ZROZ Vs. TLT: One Has More Juice To Squeeze
The article examines the future of interest rates post Trump re-focus on Jerome Powell and the FED rate. PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange and iShares 20+ Year Treasury Bond ETF are two of the longest duration US debt focused ETFs and investors can sink their teeth into. Both are at two decade high yields.
ZROZ: A Real Conviction Play (Rating Upgrade)
The PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund ETF provides an active play on long-term yields while delivering income through sales on imputed returns. We see additional flattening of long-term bond yields being en route, possibly accommodated by a more docile term premium. Key economic indicators suggest the U.S. economy is intact. However, investors could price lower growth expectations, leading to price support for ZROZ via lower long-term yields.
ZROZ: Yields Are Just Too High, Reiterating Buy
Despite recent challenges, I maintain a "Buy" rating on PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF for its long-term potential. Although the ZROZ ETF has underperformed recently I believe it offers a significant margin of safety and attractive yield. Risk-averse investors may wait for more economic and geopolitical clarity, but long-duration bonds remain an appealing trade for 2025 and beyond.
ZROZ: If You Like Duration, You Will Love This Fund
ZROZ is a fixed-income ETF with a 27-year duration, highly sensitive to 30-year U.S. Treasury rate movements. Long rates are at the top of their historic range, expected to be range-bound between 4% and 5%. A 100 bps contraction in long rates could yield a 27% gain for ZROZ, making it an attractive buy.
ZROZ: Don't Be Confused By Macro Data
Despite recent volatility, I maintain a "Buy" rating on the ZROZ ETF as a recession hedge, given the uncertain economic outlook. Higher implied premiums may lead to worse performance of long-term US treasuries in a soft landing scenario. Potential downward revisions in non-farm payrolls data suggest long-term US Treasuries may see a sharp rally in early 2025.
ZROZ: Recession Protection On Sale
The PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF tracks long-dated US government STRIPS, giving it increased interest rate sensitivity. The current 4.5% yield on long-dated US treasuries is well above the Fed's neutral rate and should deliver higher returns relative to the short end of the curve. A 4.5% nominal annual return for 25-30 years will likely lag behind riskier alternatives such as equities or real estate.
ZROZ ETF: Better Staying On The Sidelines For Now
ZROZ ETF is a long-term zero-coupon bond vehicle managed by PIMCO, which has shed nearly 15% of its value in the past year. We believe the volatile interest rate environment makes this long-duration bond vehicle unattractive. A rising term premium and liquidity worries might dampen ZROZ's pricing and dividend-based prospects.
ZROZ Vs. EDV: Which Zero Coupon Treasury ETF Is Better?
Zero coupon treasury bonds are considered to be a better way to benefit from rate cuts in the US compared to ordinary treasury bonds. While the bond market is getting repriced for a "higher for longer" scenario, I expect interest rate cuts sooner rather than later. Both ZROZ and EDV are fine if you expect interest rate cuts in the foreseeable future, though one of these two ETFs is slightly better.
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ZROZ: Likely To Rise Significantly Through 2025
Long-term Treasury ETFs like ZROZ have the potential to outperform equities and commodities due to a disinflationary downcycle and a significant decline in yields. The behavior of the yield curve suggests that long-term yields will fall over the course of the next two years, benefiting long-duration Treasuries. Relative performance metrics currently show underperformance of ZROZ, but it will likely beat the S&P 500 and commodity ETFs as yields fall.
ZROZ: Long-Term Treasury STRIPs ETF, For Dovish Traders
The Federal Reserve will likely cut rates this year. Significant rate cuts would almost certainly lead to higher bond prices. Most bond funds would benefit, some more than others. ZROZ would be one of the biggest beneficiaries.
ZROZ: Adding Duration Risk With The PIMCO 25+ Zero Coupon Bond Fund
The bear market in bonds has ended and long-duration assets are rallying, presenting an opportunity for capital gains. The Federal Reserve's interest rate hikes have negatively impacted the bond market, leading to losses in fixed income assets. I predict that inflation will normalize and the Fed will eventually cut rates, leading to potential gains in the ZROZ bond fund.
It's The Best Time In 22 Years To Buy These High-Yield ETFs
The fastest interest rate hiking cycle in 42 years crushed bonds, some as much as 50%. The equity risk premium has fallen to 22-year lows. Compared to stocks it's the best time in 22 years to buy high-yield US Treasury bond ETFs. There is a 66% chance the Fed is done hiking and historically long bonds soar about 60% within two years of the Fed ending its rate hike cycle.
ZROZ: Adding Duration May Not Be Worth The Risk
We challenge the view that interest rate normalization accompanied by a Fed pivot will drive down ultra-long-term yields. Low long-term yields are an illusion created by the effects of quantitative easing, and they are unlikely to repeat. We think there is room for long-term yields to rise. We see the scenario for a gradual normalization of monetary policy and the unwinding of the Fed's quantitative easing program to drive long-term yields closer to 5.5% over time.
ZROZ: PIMCO Fund Is A Big Bet On A Deflationary Bust
ZROZ from PIMCO is an ultra-long duration bond ETF. The fund has been battered with the rising interest rates. We look at whether this would be a good play today with interest rates far higher than they were 2 years back.
ZROZ: The Ultimate Play To Profit From Dovish Fed
ZROZ is an ETF vehicle, which invests in long-duration zero coupon U.S. Treasuries. Since the FED changed its stance on the monetary policy, ZROZ has delivered nothing but inferior returns. High duration and notable convexity factors of ZROZ offer a great exposure for investors, who consider dovish monetary policy to be around the corner.
The Worst Lies Ahead Of Us: Part I-Euphoria's Last Stand
The first quarter was far better than expected but I do not believe it will last, as the long lags to monetary policy persist. First quarter earnings season is likely to show the flow through of multiple items that will reduce earnings further.
ZROZ: Treasuries Likely To Win 2023
On the surface, we have seen a revival in "risk assets" like equities and industrial metals, but the real story may be elsewhere. Momentum in long-term interest rates has decelerated after having risen through much of 2022, meaning that bonds have risen alongside equities in recent weeks.