On September 18, the Federal Reserve will definitely cut interest rates. During the rate-cutting cycle, U.S. Treasury bonds and Treasury bond ETFs are popular choices for investors. However, the investment strategies for Treasury bonds of different maturities and their related ETFs vary. Below is a summary of some market consensus. Please correct me if I'm wrong:
$iShares barclays 20+ Yr Treasury Bd(TLT.US) — relatively stable
Treasury bonds of different maturities have different risk characteristics, which affect their volatility and return performance. For beginners, it's advisable to start by understanding some basic ETFs, such as TLT.
TLT is a longer-term Treasury bond ETF with a volatility of about 1%. Other Treasury bond ETFs of different maturities will have amplified volatility depending on the length of the maturity. If you want to try to profit from price differences but don’t want to face excessive volatility, TLT is a good choice. It offers some volatility but is relatively stable.
$Direxion 20+Yr Trsry Bull 3X(TMF.US) — higher volatility but with decay
TMF is a triple-leveraged Treasury bond ETF. Although it has higher volatility, it has the characteristic of decay, meaning its value gradually decreases over time—a sunk cost.
$VG Extend Trsy(EDV.US) — even higher volatility
If you want even higher volatility but don’t want to deal with decay, consider EDV. EDV is a long-term Treasury bond ETF with higher volatility but no decay issues like leveraged ETFs.
Directly buying Treasury bonds
If your goal is purely to collect interest, you can consider buying Treasury bonds directly. However, this comes with reinvestment risk—when the bonds mature, you’ll face market interest rate risks when reinvesting.