Much of the media buzz around the “Trump trade” following Donald Trump’s 2024 presidential election victory has focused on risk assets. Retail investors are speculating on cryptocurrencies, defense stocks and reshoring-related themes. But the real Trump trade might lie with Treasury bonds.
Treasurys are often dismissed as boring. After all, they’re simply debt issued by the federal government. Yet, they play a crucial role in shaping monetary policy alongside the Federal Reserve, influencing everything from mortgage rates to credit card interest rates and corporate borrowing costs.
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According to commentary from the DWS Group CIO Office, investors may be overpricing the benefits of fiscal stimulus and tariff-related promises while underestimating risks like labor market softness, slower economic growth and geopolitical uncertainty.
They highlight that while job openings have returned to pre-pandemic levels, payroll trends show a downward trajectory, which could eventually push unemployment rates higher. Accordingly, the Fed expects inflation to ease toward its target over time, supporting slower-than-expected rate reductions.
The DWS team also points out that current monetary policy remains restrictive. Real yields are above 1.9%, and 10-year Treasury yields currently exceed 4.2%. In their view, these levels are likely to act as a headwind to constrain economic growth.
Looking ahead, the chief investment office at DWS Asset Management expects a normalization of the yield curve, with at least three 25-basis-point rate cuts likely by the end of 2025. They caution, however, that a roughly 30% risk of recession persists during this time frame.
On a near-term, one-to-three-month horizon, the DWS CIO Office is optimistic about the two- and 10-year segments of the Treasury market. They believe yields in these maturities have risen too far, too quickly, potentially creating opportunities for investors to capitalize as the bond market adjusts.
Regardless of whether you agree or disagree with these views, there are opportunities to use various Treasury exchange-traded funds, or ETFs, to express your thesis.
“Treasury ETFs allow investors to gain exposure through a stock-like instrument that trades on market exchanges,” says Tiana Patillo, financial advisor manager at Vanguard. “A Treasury ETF can provide greater liquidity, diversification and lower transaction costs.”
These ETFs allow you to access the Treasury market without the hassle of navigating TreasuryDirect.gov — offering the convenience of buying and selling Treasurys like any other stock.
“Key things to watch for include yield to maturity, which measures the expected return of the ETF assuming all bonds are held until maturity; and duration, which measures the sensitivity of the ETF’s price to changes in interest rates,” says Rohan Reddy, director of research at Global X ETFs.
Here’s a look at seven of the best Treasury bond ETFs to buy for 2025:
| ETF | Expense ratio | Yield to maturity |
| Vanguard Intermediate-Term Treasury ETF (ticker: VGIT) | 0.04% | 4.2% |
| Vanguard Long-Term Treasury ETF (VGLT) | 0.04% | 4.6% |
| Vanguard Short-Term Treasury ETF (VGSH) | 0.04% | 4.2% |
| iShares U.S. Treasury Bond ETF (GOVT) | 0.05% | 4.2% |
| Invesco Equal Weight 0-30 Year Treasury ETF (GOVI) | 0.15% | 4.3% |
| Xtrackers US 0-1 Year Treasury ETF (TRSY) | 0.06% | 4.4%* |
| Direxion Daily 20+ Year Treasury Bear 3X Shares (TMV) | 1.01% | 4.4%** |
*30-day SEC yield.**Trailing-12-month yield.
Vanguard Intermediate-Term Treasury ETF (VGIT)
“Treasurys are perceived to be the safest security available given their extremely low probability of default, as they’re backed by the full faith and credit of the U.S. Treasury Department,” says Jeffrey Johnson, principal and head of fixed-income product at Vanguard. Short of a sovereign default, investors largely believe that the U.S. government will make good on its debt when due.
Vanguard’s “Goldilocks” Treasury ETF is VGIT, which targets the Bloomberg U.S. Treasury 3-10 Year Bond Index. This ETF maintains a balanced 4.9-year duration and a 4.2% yield to maturity, making it suitable as a core holding for long-term passive investors. Because it uses low-cost indexing techniques, VGIT is able to keep fees minimal, with a total expense ratio of just 0.04%. It is also available as a mutual fund.
Vanguard Long-Term Treasury ETF (VGLT)
If you believe that long-term bond yields are likely to fall, perhaps due to a slowing economy, then the Vanguard Treasury ETF to consider is VGLT. This ETF tracks the Bloomberg U.S. Long Treasury Bond Index, giving it much higher interest rate sensitivity with a duration of 14.7 years and a 4.6% yield to maturity. It charges the same 0.04% expense ratio as VGIT but is far more volatile on a day-to-day basis.
If bond yields drop, bond prices rise, and the higher the maturity, the greater the price appreciation potential. VGLT’s focus on long-term Treasurys makes it a standout choice for investors aiming to capitalize on falling yields or seeking a hedge during periods of economic uncertainty. As with VGIT, the Treasurys held by VGLT have unparalleled credit quality thanks to the backing of the U.S. Treasury.
Vanguard Short-Term Treasury ETF (VGSH)
Instead of using an intermediate-term Treasury ETF like VGIT, you can “barbell” VGLT with a short-term Treasury ETF like VGSH, which tracks the Bloomberg U.S. Treasury 1–3 Year Bond Index. This ETF has far lower interest rate sensitivity thanks to its lower 1.9-year duration, which minimizes price volatility. Currently, it pays a 4.2% yield to maturity and charges the same 0.04% expense ratio as VGLT and VGIT.
A barbell strategy combines short-term and long-term bonds, avoiding intermediate maturities. This approach balances the sensitivity of long-term bonds with the stability and reinvestment flexibility of short-term bonds. Intermediate bonds, by comparison, lack the significant upside of long-term bonds or the liquidity of short-term bonds, making a barbell more versatile in dynamic rate environments.
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iShares U.S. Treasury Bond ETF (GOVT)
If you’re not interested in actively trading Treasurys and just want to benefit from their high credit quality and state tax exemption, you can buy the entire Treasury market with GOVT. This ETF tracks the ICE U.S. Treasury Core Bond Index, providing exposure to 187 Treasurys with maturities ranging from 1 to 30 years. It charges a low 0.05% expense ratio and pays monthly distributions.
GOVT’s portfolio has an average yield to maturity of 4.2% and a duration of 5.9 years, balancing income potential with moderate interest rate sensitivity. As one of the most popular Treasury ETFs, it has $30 billion in AUM, reflecting its widespread appeal. If you’re looking for a “total Treasury market” ETF, GOVT fits the bill. However, the ETF might be too generalized for traders and advanced investors.
Invesco Equal Weight 0-30 Year Treasury ETF (GOVI)
GOVT isn’t the only broad Treasury ETF on the market. As an alternative, Invesco offers GOVI. “GOVI equally weights every maturity across the U.S. Treasury curve, providing investors with a disciplined investment process,” says Jason Bloom, head of fixed-income ETF strategy at Invesco. The ETF has an average duration of 10.4 years and a 4.3% yield to maturity. It charges a 0.15% expense ratio.
“This equally weighted approach mitigates the impact of issuance trends, and thus GOVI reduces the risk of ‘duration drift’ commonly experienced by broader U.S. Treasury ETFs,” Bloom says. “Duration drift” occurs when the average maturity of a bond portfolio changes over time due to new issuances, leading to unintentional shifts in interest rate sensitivity and exposure to greater volatility.
Xtrackers US 0-1 Year Treasury ETF (TRSY)
All the previous Treasury ETFs have some degree of interest rate risk, with the longer maturity variants experiencing higher sensitivity. If you want to mitigate this as much as possible, an ultra-short-term Treasury ETF like TRSY might be ideal. This ETF tracks the ICE U.S. Short Bond Index, a benchmark of U.S. Treasurys with a minimum term maturity greater than one month and less than or equal to one year.
“TRSY can serve as a cash management alternative to traditional savings accounts while offering a hedge against interest rate fluctuations,” notes Arne Noack, regional investment head — Xtrackers, Americas — at DWS Group. “Additionally, it is competitively priced, with an expense ratio of 0.06%.” Even with falling interest rates, the ETF is still paying a competitive 4.4% 30-day SEC yield with very low risk.
Direxion Daily 20+ Year Treasury Bear 3X Shares (TMV)
Ever thought about betting against the Treasury market? Institutional traders often short Treasurys using futures, but for retail investors, the margin and capital requirements can be prohibitive. That’s where inverse leveraged ETFs like TMV come in. This ETF aims to deliver three times the daily inverse performance of the ICE U.S. Treasury 20+ Year Bond Index by using swaps.
This mechanic makes TMV a leveraged bet that 20-year Treasury yields will stay elevated, keeping long-term bond prices under pressure. However, TMV is best suited for short-term trading due to volatility decay, unpredictable compounding, and a high 1.01% expense ratio. Keep in mind that this ETF is also highly volatile and can see dramatic fluctuations when important economic news is released, so trading it is best left to the pros — or very active and tuned-in short-term traders.
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What’s the Best Treasury ETF? 7 Options for Investors originally appeared on usnews.com
Update 12/11/24: This story was published at an earlier date and has been updated with new information.
