A treasury bond ETF is a type of exchange traded fund that is based on the performance of an underlying Treasury bond index, such as the Lehman Brothers Bond Index. The Treasury bond has maturities typically of 10, 20 and 30 years and the ETF based on any of these durations seeks to mirror the returns paid on these various types of treasury bonds. Treasury ETFs, like all types of exchange traded funds, seeks to match those returns in the index precisely as their primary objective without outperforming the market.

Exchange Traded Fund

Exchange traded funds (ETF) provide a way for an investor to mimic the returns of the index that the ETF follows. This reduces some of the risk to the investor by not purchasing the underlying securities that make up the index directly but allowing the investor to share in the performance. ETFs are passively managed funds with fees and charges that are lower than comparable mutual funds.


A Treasury bond index should provide a return that is slightly higher than that of a short term ETF based on treasury notes. The return is higher because bonds provide a higher maturity and the more risk an investor takes on, that interest rates will fall. Therefore, a higher yield is paid on longer bond maturities.

If you review the rates being paid on Treasury bond and other long term ETFs, relative to short term ETFs, you will see this difference in returns. This difference is the risk premium that the investor receives for waiting longer to receive their money if purchasing the underlying treasury bonds. This risk premium is also reflected in the index of which the Treasury bond ETF is tracking.


Investing in an ETF provides has legitimate risks. Any type of investment has associated risks, and although this type of investment tool is less risky than other types of ETFs, make no mistake, it is still risky. You also need to remember that ETF returns are subject to federal and state taxes, unlike treasury bonds that are exempt.

Considerations for Treasury Bond ETFs

A treasury bond ETF is an appropriate investment tool for an investor that is interested in preserving the investment capital, or principal. Such an investor is looking for income opportunities and has a short investment term. All of these considerations should be accounted for if you decide to purchase a treasury bond ETF.

The risks associated with investing in an ETF that is based on treasury bonds is somewhat less than an equity based ETF, understanding again that the ETF mirrors the performance of the index and is still subject to loss risks.

The NASDAQ and Treasury Bond ETFs

The NASDAQ trading system is the best resource to go to for information on the prevailing returns on Treasury bond ETFs. The NASDAQ is the over the counter exchange where most ETF trading takes place. The information on the NASDAQ can show you what is available in terms of Treasury bond ETFs and what funds offer the best tracking of the underlying index.

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