new Vanguard Ultra-Short Bond ETF

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
watchnerd
Posts: 13614
Joined: Sat Mar 03, 2007 10:18 am
Location: Gig Harbor, WA, USA

Re: Vanguard plans to add Ultra-Short Bond ETF to lineup

Post by watchnerd »

ribonucleic wrote: Wed Jan 27, 2021 1:39 pm the economy heats up so fast that Yellen has to do some braking?
I'm not following.

Yellen is head of the Treasury.

What braking is she supposed to do in her role?
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
User avatar
jeffyscott
Posts: 13487
Joined: Tue Feb 27, 2007 8:12 am

Re: new Vanguard Ultra-Short Bond ETF

Post by jeffyscott »

anon_investor wrote: Sun Apr 11, 2021 6:25 amThe current composite rate guaranteed for 6 months is 1.68%. The estimated composite rate for 6 months starting May 1 is 2.1%+. So if you bought today you would get 6 months at 1.68% and then 6 months at 2.1%+. So if you bought today, for 12 months you would likely get 1.89%+, which is amazing for anything that has 0 risk (no interest rate risk, no credit risk).
I am thinking I-bonds can make sense even for short term savings. We have a small taxable savings account earning 0.5%. If I move that $10-20K to I-bonds after May 1, that will earn over 1% in the first 6 months based on the annualized rate of 2.1%+. Then even if it earns 0% for the second six months and I cash it in after 1 year, I will have a return of at least 1% for the year even with the 3 month penalty.

In addition, I can actually buy late in May, say May 25, and then sell May 1, 2022 and earn that 1% in about 49 weeks. As an added bonus I would pay only 12% Federal income tax on the earnings, instead of nearly 20% combined Fed and State.

I would give up the liquidity of the savings account for the initial ~49 weeks, but being retired and old enough that does not really matter to me, as we can access all of our money at any time.
chem
Posts: 113
Joined: Sun Apr 12, 2020 7:45 am

Re: new Vanguard Ultra-Short Bond ETF

Post by chem »

looking at VUSB's holdings has some surprises:
https://advisors.vanguard.com/investmen ... #portfolio

an "ultra short term" bond ETF whose top 4 holdings mature in 2024, 2024, 2026, and 2029.

for comparison, the LATEST maturity in ICSH's top 10 holdings is 2023.
https://www.ishares.com/us/products/258 ... income-etf

I wish vanguard would publish analytics about VUSB's portfolio. it might not be what people expect.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by anon_investor »

jeffyscott wrote: Tue Apr 13, 2021 7:37 am
anon_investor wrote: Sun Apr 11, 2021 6:25 amThe current composite rate guaranteed for 6 months is 1.68%. The estimated composite rate for 6 months starting May 1 is 2.1%+. So if you bought today you would get 6 months at 1.68% and then 6 months at 2.1%+. So if you bought today, for 12 months you would likely get 1.89%+, which is amazing for anything that has 0 risk (no interest rate risk, no credit risk).
I am thinking I-bonds can make sense even for short term savings. We have a small taxable savings account earning 0.5%. If I move that $10-20K to I-bonds after May 1, that will earn over 1% in the first 6 months based on the annualized rate of 2.1%+. Then even if it earns 0% for the second six months and I cash it in after 1 year, I will have a return of at least 1% for the year even with the 3 month penalty.

In addition, I can actually buy late in May, say May 25, and then sell May 1, 2022 and earn that 1% in about 49 weeks. As an added bonus I would pay only 12% Federal income tax on the earnings, instead of nearly 20% combined Fed and State.

I would give up the liquidity of the savings account for the initial ~49 weeks, but being retired and old enough that does not really matter to me, as we can access all of our money at any time.
FYI it looks like I Bonds purchased from May-Oct 2021 will earn 3.53% for the first 6 months. This makes I Bonds purchased during that time period a pretty darn good deal!
User avatar
jeffyscott
Posts: 13487
Joined: Tue Feb 27, 2007 8:12 am

Re: new Vanguard Ultra-Short Bond ETF

Post by jeffyscott »

anon_investor wrote: Tue Apr 13, 2021 8:38 am
jeffyscott wrote: Tue Apr 13, 2021 7:37 am
anon_investor wrote: Sun Apr 11, 2021 6:25 amThe current composite rate guaranteed for 6 months is 1.68%. The estimated composite rate for 6 months starting May 1 is 2.1%+. So if you bought today you would get 6 months at 1.68% and then 6 months at 2.1%+. So if you bought today, for 12 months you would likely get 1.89%+, which is amazing for anything that has 0 risk (no interest rate risk, no credit risk).
I am thinking I-bonds can make sense even for short term savings. We have a small taxable savings account earning 0.5%. If I move that $10-20K to I-bonds after May 1, that will earn over 1% in the first 6 months based on the annualized rate of 2.1%+. Then even if it earns 0% for the second six months and I cash it in after 1 year, I will have a return of at least 1% for the year even with the 3 month penalty.

In addition, I can actually buy late in May, say May 25, and then sell May 1, 2022 and earn that 1% in about 49 weeks. As an added bonus I would pay only 12% Federal income tax on the earnings, instead of nearly 20% combined Fed and State.

I would give up the liquidity of the savings account for the initial ~49 weeks, but being retired and old enough that does not really matter to me, as we can access all of our money at any time.
FYI it looks like I Bonds purchased from May-Oct 2021 will earn 3.53% for the first 6 months. This makes I Bonds purchased during that time period a pretty darn good deal!
Well, that means I am certain to make that move. I got the latest tipswatch email with that info shortly after your post. That makes it about 1.75% as the guaranteed minimum return for the first year. At my state income tax rate, that's like getting a 1 year CD at 2%.
User avatar
jeffyscott
Posts: 13487
Joined: Tue Feb 27, 2007 8:12 am

Re: new Vanguard Ultra-Short Bond ETF

Post by jeffyscott »

chem wrote: Tue Apr 13, 2021 8:01 am looking at VUSB's holdings has some surprises:
https://advisors.vanguard.com/investmen ... #portfolio

an "ultra short term" bond ETF whose top 4 holdings mature in 2024, 2024, 2026, and 2029.

for comparison, the LATEST maturity in ICSH's top 10 holdings is 2023.
https://www.ishares.com/us/products/258 ... income-etf

I wish vanguard would publish analytics about VUSB's portfolio. it might not be what people expect.
Perhaps they have a floating rate or are likely to be called? I would assume the ETF will have a distribution of effective maturities and durations that are similar to their ultrashort mutual fund.

Image
https://investor.vanguard.com/mutual-fu ... olio/vubfx
User avatar
watchnerd
Posts: 13614
Joined: Sat Mar 03, 2007 10:18 am
Location: Gig Harbor, WA, USA

Re: new Vanguard Ultra-Short Bond ETF

Post by watchnerd »

chem wrote: Tue Apr 13, 2021 8:01 am looking at VUSB's holdings has some surprises:
https://advisors.vanguard.com/investmen ... #portfolio

an "ultra short term" bond ETF whose top 4 holdings mature in 2024, 2024, 2026, and 2029.

for comparison, the LATEST maturity in ICSH's top 10 holdings is 2023.
https://www.ishares.com/us/products/258 ... income-etf

I wish vanguard would publish analytics about VUSB's portfolio. it might not be what people expect.
The average duration is what really matters.

You could combine those longer holdings with a bunch of T-bills and drop the average duration dramatically.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
chem
Posts: 113
Joined: Sun Apr 12, 2020 7:45 am

Re: new Vanguard Ultra-Short Bond ETF

Post by chem »

jeffyscott wrote: Tue Apr 13, 2021 9:23 am
chem wrote: Tue Apr 13, 2021 8:01 am looking at VUSB's holdings has some surprises:
https://advisors.vanguard.com/investmen ... #portfolio

an "ultra short term" bond ETF whose top 4 holdings mature in 2024, 2024, 2026, and 2029.

for comparison, the LATEST maturity in ICSH's top 10 holdings is 2023.
https://www.ishares.com/us/products/258 ... income-etf

I wish vanguard would publish analytics about VUSB's portfolio. it might not be what people expect.
Perhaps they have a floating rate or are likely to be called? I would assume the ETF will have a distribution of effective maturities and durations that are similar to their ultrashort mutual fund.

Image
https://investor.vanguard.com/mutual-fu ... olio/vubfx
that could be the case, yes. the ETF is not stated to be the same underlying fund as the mutual funds, though, and the mutual funds' EOY portfolio has bonds with actual short maturities (nothing maturing in 2024+ topping THOSE lists).
chem
Posts: 113
Joined: Sun Apr 12, 2020 7:45 am

Re: new Vanguard Ultra-Short Bond ETF

Post by chem »

watchnerd wrote: Tue Apr 13, 2021 9:46 am
chem wrote: Tue Apr 13, 2021 8:01 am looking at VUSB's holdings has some surprises:
https://advisors.vanguard.com/investmen ... #portfolio

an "ultra short term" bond ETF whose top 4 holdings mature in 2024, 2024, 2026, and 2029.

for comparison, the LATEST maturity in ICSH's top 10 holdings is 2023.
https://www.ishares.com/us/products/258 ... income-etf

I wish vanguard would publish analytics about VUSB's portfolio. it might not be what people expect.
The average duration is what really matters.

You could combine those longer holdings with a bunch of T-bills and drop the average duration dramatically.
well, that's not entirely true. a fund of 66/33 4-week t-bills and 30-year t-bonds will be distinguishable from a fund of just 10-year notes. but I get your drift.

and my point is that unless you download all the holdings yourself and do the math on weights and dates, we DON'T KNOW the average duration of VUSB. or much of anything else, frankly. despite vanguard having all the required info at their fingertips, they launch their first new ETF in forever and are too lazy to even update either the advisor or investor sites with portfolio analytics. it's inexcusable. "hey customer, buy this, it has some bonds, probably different from BSV somehow". I'm not even considering putting any money into it until they put some effort into it.

https://advisors.vanguard.com/investmen ... tributions
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

Re: new Vanguard Ultra-Short Bond ETF

Post by calwatch »

ETF.com has a three month retrospective: https://www.etf.com/sections/features-a ... newest-etf

Already has over $1 billion in assets and is the ninth largest fund in the ultra short term category. The leaders are JPST, SHV, BIL, ICSH, GSY, GBIL, BSCL, and IBDM. BSCL and IBDM are just the short dated defined maturity bond funds that are gradually headed towards their expiration.
UpperNwGuy
Posts: 9479
Joined: Sun Oct 08, 2017 7:16 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by UpperNwGuy »

calwatch wrote: Fri Jul 09, 2021 8:37 pm ETF.com has a three month retrospective: https://www.etf.com/sections/features-a ... newest-etf

Already has over $1 billion in assets and is the ninth largest fund in the ultra short term category. The leaders are JPST, SHV, BIL, ICSH, GSY, GBIL, BSCL, and IBDM. BSCL and IBDM are just the short dated defined maturity bond funds that are gradually headed towards their expiration.
I'm frankly astonished that so many people are seeking actively-managed, ultra-short-term bond ETFs when interest rates are so low.
retiringwhen
Posts: 4743
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: new Vanguard Ultra-Short Bond ETF

Post by retiringwhen »

UpperNwGuy wrote: Sat Jul 10, 2021 9:13 pm I'm frankly astonished that so many people are seeking actively-managed, ultra-short-term bond ETFs when interest rates are so low.
My son prefers simplicity over all, and wanted something like a High Yield Savings account to build emergency/next car funds that he will likely only tap every few years. He has two financial institutions, a credit union and Vanguard. The CU has not very attractive CD or savings rates, but top notch every day banking institution. He chose an ultra-short-bond fund for that fund. So far he has done about as well as I have done with a mix of HYSA and no-penalty CDs at Ally and it is way less work for him.
langlands
Posts: 1093
Joined: Wed Apr 03, 2019 10:05 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by langlands »

Heh, first thing I thought when I saw the name was that it would be an ETF that shorts bonds, i.e. bets against bonds. Obviously I'm much more familiar with the offerings of Proshares and Direxion than Vanguard.
UpperNwGuy
Posts: 9479
Joined: Sun Oct 08, 2017 7:16 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by UpperNwGuy »

retiringwhen wrote: Sat Jul 10, 2021 9:20 pm
UpperNwGuy wrote: Sat Jul 10, 2021 9:13 pm I'm frankly astonished that so many people are seeking actively-managed, ultra-short-term bond ETFs when interest rates are so low.
My son prefers simplicity over all, and wanted something like a High Yield Savings account to build emergency/next car funds that he will likely only tap every few years. He has two financial institutions, a credit union and Vanguard. The CU has not very attractive CD or savings rates, but top notch every day banking institution. He chose an ultra-short-bond fund for that fund. So far he has done about as well as I have done with a mix of HYSA and no-penalty CDs at Ally and it is way less work for him.
I can understand the desire for simplicity. In 2019 and prior I had all my emergency/next car/next vacation funds in Vanguard's Prime Money Market Fund, and it was simple and easy to manage. Now my funds are in a more complicated mix of high yield savings and certificates of deposit — the opposite of simplicity.
averagedude
Posts: 1772
Joined: Sun May 13, 2018 3:41 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by averagedude »

I believe a 5 year ladder of CD's will more than likely outperform this bond fund over most 5 year rolling periods. In today's environment Ibonds would be a much better choice. However it is nice to have another option in bond land to invest in from Vanguard.
User avatar
zaplunken
Posts: 1368
Joined: Tue Jul 01, 2008 9:07 am

Re: new Vanguard Ultra-Short Bond ETF

Post by zaplunken »

UpperNwGuy wrote: Sat Jul 10, 2021 9:13 pm
calwatch wrote: Fri Jul 09, 2021 8:37 pm ETF.com has a three month retrospective: https://www.etf.com/sections/features-a ... newest-etf

Already has over $1 billion in assets and is the ninth largest fund in the ultra short term category. The leaders are JPST, SHV, BIL, ICSH, GSY, GBIL, BSCL, and IBDM. BSCL and IBDM are just the short dated defined maturity bond funds that are gradually headed towards their expiration.
I'm frankly astonished that so many people are seeking actively-managed, ultra-short-term bond ETFs when interest rates are so low.
I hold the Ultra Short Term Bond Fund due to it's duration in a tax deferred account. The Short Term Investment Grade fund's duration is just under 3 times higher but the yield is 2 1/4 times higher, I hold that in a tax deferred account also but the duration is higher than I like. There is no winning in fixed income, when rates rise the duration will be an issue.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: new Vanguard Ultra-Short Bond ETF

Post by anon_investor »

UpperNwGuy wrote: Sat Jul 10, 2021 9:13 pm
calwatch wrote: Fri Jul 09, 2021 8:37 pm ETF.com has a three month retrospective: https://www.etf.com/sections/features-a ... newest-etf

Already has over $1 billion in assets and is the ninth largest fund in the ultra short term category. The leaders are JPST, SHV, BIL, ICSH, GSY, GBIL, BSCL, and IBDM. BSCL and IBDM are just the short dated defined maturity bond funds that are gradually headed towards their expiration.
I'm frankly astonished that so many people are seeking actively-managed, ultra-short-term bond ETFs when interest rates are so low.
Likely it is money that can't easily be moved to HYSAs.
Post Reply