December 2, 2016 Comments (0) Blog

Vanguard Extended Duration Treasury Index Investment Losses

(Last Updated On: December 7, 2016)

Have you suffered losses investing in Vanguard Extended Duration Treasury Index? If so, The White Law Group may be able to help.

Since the election, much of the financial commentary has centered on the stock market’s surprising surge. But the largest changes by far have been in expectations for interest rates, which, in turn, have affected the bond markets.

The 10-year U.S. Treasury yield jumped 53 basis points, ending the month at 2.37%. It gained another 8 points on Dec. 1, sending bond prices diving.

In addition,  a huge supply of new muni bonds were issued in October, as state and local governments rushed to fund projects ahead of what they expected to be a volatile market after the election.

Funds that invest in long-term bonds with the shakiest credit have been hit hardest. One example, long-term California municipal bonds, are down 6.6%, including reinvested interest, since the July low in interest rates. High-yield munis are down 6.1% the same period.

Vanguard Extended Duration Treasury Index (VEDTX), a $1.1 billion fund, has dropped $21.2% since July 8. While the fund invests in high-quality Treasury securities and charges just 0.06% in expenses, its average duration is 24.73 years.

According to the Vanguard Group website, Vanguard Extended Duration Treasury Index Fund seeks to track the performance of an index of extended-duration zero-coupon U.S. Treasury securities.

“The fund is primarily intended for institutional investors with extremely long-term liabilities—20 years or more. Prospective individual investors are urged to consult with their own advisors to determine if the fund is suitable for their overall investment programs and financial positions.”

 

Recent investment returns
  Year-to-Date
as of 12/06/2016
Year-to-Date
as of 11/30/2016
Previous Month
11/30/2016
3-Month Total
as of 11/30/2016
Ext Dur Treasury Idx Inst 1.09% 1.93% –11.07% –18.56%
BloomBarc US Trsy Strips 20-30Yr Eq* 2.12% –10.42% –18.21%
 
For more information on The White Law Group’s investigation of municipal bonds, see Muni Bonds Sinking as Rates are Rising.

Municipal bonds used to be one of the safest investments that a financial advisor could recommend to a client, and were often utilized by retired investors looking for a safe way to generate income in retirement.

Unfortunately, the heyday of muni bonds appears over and any financial advisor not adequately disclosing the risks of municipal bonds is doing so negligently.  There is simply too much information out there in the media and too many negative warning signs for a financial advisor to continue to tout these investments as super low risk.

The foregoing information has been provided by The White Law Group.  The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group visit http://www.whitesecuritieslaw.com.  For a free consultation with a securities attorney, please call the firm’s Chicago office at 888-637-5510.