Just a handful of long-term bond funds are cheap to own for a brief interval.
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If you want to make a bet on declining interest rates, shares in a fund that owns long-term bonds are a good option. This table ranks exchange-traded long-term bond funds on their three-month holding costs.
The obvious choice is the iShares 20+ Year Treasury Bond Fund (TLT). The fund’s portfolio has an average maturity of 26 years and makes a big move up or down in value when rates go, respectively, down or up. We calculate that holding TLT for three months will cost you $4.66 per $10,000 invested.
| 3-month Holding Cost* | |||
| Liquidity Score | |||
| Ticker | Exchange-traded fund | ||
| Diversified and corporate | |||
| CLY | iShares 10+ Year Credit Bond | $5.67 | B |
| SPLB | SPDR Portfolio Long Term Corp Bd | 6.54 | B |
| VCLT | Vanguard Long-Term Corporate Bd | 6.96 | B |
| Government | |||
| TLT | iShares 20+ Year Treasury Bond | 4.66 | A+ |
| SPTL | SPDR Portfolio Long Term Treasury | 5.99 | B |
| TLH | iShares 10-20 Year Treasury Bond | 6.95 | B |
| BLV | Vanguard Long-Term Bond | 8.14 | B |
| EDV | Vanguard Extended Duration Trs | 9.16 | B |
| VGLT | Vanguard Long-Term Treasury | 9.83 | B |
*Cost of a $10,000 position held for three months. Reflects bid/ask spread, expense ratio and cost offset from securities lending.
Data sources: Morningstar, Bloomberg, fund distributors
TLT’s strong showing here reflects, in part, a high trading volume that keeps the bid/ask spread tight. But, with an expense ratio of 0.15% annually, TLT is less compelling as a long-term investment. In the ranking of long-term bond ETFs for ten-year holding costs, SPDR Portfolio Long Term Treasury (SPTL) beats TLT by a mile. See Best ETFs: Long-Term Bonds.
For links to the three-month rankings in other categories, see Best ETFs for Trading.