This fund holds 45 bonds, all with maturities greater than 20 years. Some of the bonds likely trade at prices higher than par value because they were issued when interest rates were higher than today. Those issued when interest rates were lower than currently would trade below par value. The fact that the yield to maturity is higher than the cash yield indicates that, on average, the bonds trade below par value.
Income Investor
The advantage of buying this ETF rather than an individual long-term US Treasury bond is that the ETF is extremely liquid with a very narrow bid/ask spread. The disadvantages are the lack of a fixed maturity date, a cash payout that will vary over time, the existence of a management fee, and less clarity as to the specific bonds held and their prices versus par. Overall, the ETF is probably the better choice unless an investor is very committed to holding an individual Treasury long-term bond for many years.
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Interactive Performance Chart
TLT was first recommended here on November 29, 2024