Is there a better ETF for notes?

R

RGLD

All I can find is SHY. Pricing is choppy and it doesn't move as much as it's "elder brother" TLT. It moves probably 1/4 as TLT. Am I missing something here or do bonds generally have higher volatility than notes? Or SHY is a bad ETF but it's all we got outside of futures?
 
SHY only invests in T-Notes with 1-3 year maturities. Very short term bonds/notes don't have a lot of volatility. TLT invests in bonds with 20+ year maturities. IEF is "intermediate term," ~10 year maturities. The TLT is probably the most volatile of the standard treasury ETFs. There are leveraged versions, but there are issues with them.
 
RGLD said:
Am I missing something here or do bonds generally have higher volatility than notes?
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Of course, that's what the concept of duration is all about - for a basis point move in yields, longer bonds are going to move more and the relative volatility is going to roughly proportional to the ratio of maturities.

PS. BTW, if I had to guess, volatility of SHY is way less than 1/4 of volatility of TLT. It should be close to 1/7 - 1/10th.
 
RGLD said:
All I can find is SHY. Pricing is choppy and it doesn't move as much as it's "elder brother" TLT. It moves probably 1/4 as TLT. Am I missing something here or do bonds generally have higher volatility than notes? Or SHY is a bad ETF but it's all we got outside of futures?
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SHY is pretty good ETF. It does good job as designed.

If you want higher duration than TLT, then look at EDV or ZROZ. They are TLT on steroids.
 
Is it a good idea to do yield spreads with these ETF's? I feel that futures give you the best ratios. Maybe you have a position in futures and use TLT or vise versa?
 
What do you mean with "the best ratios"? You can do any ratio you want. In my opinion (haven't done this) it would be kind of equivalent, while there would be way more volume and liquidity in futures though (good for larger positions) and possible better fills too, and more flexibility in position size in etf's (good for small traders).
 
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