Hey,
I know that much of the criticism about Vanguard's Long-Term Treasury fund, VUSTX, has to do with its average maturity being too low and the fact that 15% of the fund is not held in Treasuries, but in Government Mortgage-Backed Securities.
Vanguard's Short-Term Treasury fund, VFISX, follows Barclays US 1-5 Year Treasury Index and similarly has 15% in Government Mortgage-Backed Securities. Would this steer people away from the fund for part of their cash holding? Vanguard recently released a Short-Term Government Bond ETF, VGSH, which follows the Barclays US 1-3 Year Treasury Index and does not hold any GMBS. Does this make it more suitable than VFISX?
Thanks.
VG Short-Term Treasury vs ETF
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Re: VG Short-Term Treasury vs ETF
My guess is yes. When did it become available?rhymenocerous wrote: Vanguard recently released a Short-Term Government Bond ETF, VGSH, which follows the Barclays US 1-3 Year Treasury Index and does not hold any GMBS. Does this make it more suitable than VFISX?
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Re: VG Short-Term Treasury vs ETF
I think it became available towards the end of 2009. See: https://advisors.vanguard.com/VGApp/iip ... dETF112009.
Re: VG Short-Term Treasury vs ETF
According to the prospectus, VGSH does not track the Barclays 1-3 Year U.S. Treasury Index. It tracks the Barclays 1-3 Year Government Float Adjusted Index, meaning the fund invests in more than just Treasuries:
"The fund employes a 'passive management'--or indexing--investment approach designed to track the performance of the Barclays Capital U.S. 1–3 Year Government Float Adjusted Index. This Index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected securities) and U.S. government agencies and instrumentalities, as well as corporate or dollar-denominated foreign debt guaranteed by the U.S. government, all with maturities between 1 and 3 years."
It's not immediately clear to me what percentage of VGSH is invested in Treasuries, nor does the prospectus specify a percentage. A quick Google search didn't really clear things up for me, either. If you're after 100% Treasuries, I'd stay away from VGSH and stick to ETFs like SHV and SHY.
"The fund employes a 'passive management'--or indexing--investment approach designed to track the performance of the Barclays Capital U.S. 1–3 Year Government Float Adjusted Index. This Index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected securities) and U.S. government agencies and instrumentalities, as well as corporate or dollar-denominated foreign debt guaranteed by the U.S. government, all with maturities between 1 and 3 years."
It's not immediately clear to me what percentage of VGSH is invested in Treasuries, nor does the prospectus specify a percentage. A quick Google search didn't really clear things up for me, either. If you're after 100% Treasuries, I'd stay away from VGSH and stick to ETFs like SHV and SHY.
Last edited by Tortoise on Tue May 17, 2011 1:42 am, edited 1 time in total.
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Re: VG Short-Term Treasury vs ETF
Looking at the annual report, it seems that 75% of the fund is in Treasuries and 25% is in agency bonds.
Re: VG Short-Term Treasury vs ETF
That's an even lower percentage of Treasuries than VFISX holds, plus VGSH appears not to guarantee a minimum percentage of Treasury holdings like VFISX does. In any case, I suspect Harry Browne would not have recommended either of these Vanguard ST bond funds--despite their heavy weighting of Treasuries--due to the non-Treasury portion of their holdings.rhymenocerous wrote: Looking at the annual report, it seems that 75% of the fund is in Treasuries and 25% is in agency bonds.