The Best Treasury ETFs of 2023

These Treasury ETFs produced impressive gains amid declining bond prices in 2023.

kent
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Research Lead
Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

While broad market bond ETFs have negative returns this year, the best Treasury exchange-traded funds of 2023 have produced an impressive combination of yield and positive price gains. Furthermore, our spotlighted funds have generated these results without relying completely on risky inverse strategies.  

See our list of best Treasury ETFs, as well as an outlook on the Treasury bond market. This year’s winners in the Treasury category include a combination of actively managed bond ETFs and floating-rate funds.

High Yields and Low Prices on Treasury ETFs 

Over the past two years, Treasury ETF yields have risen significantly, while prices have fallen, because of strong post-pandemic economic growth, rising inflation, investor sentiment and the Federal Reserve's aggressive interest-rate hike campaign. 

For example, the yield on the largest Treasury ETF, the iShares 20+ Year Treasury Bond ETF (TLT), rose from a low of just under 1.00% in July of 2020 to more than 5.30% in October 2023. That represents an increase of over 530%. Over the same period the price of TLT fell more than 50%.

The Best Performing Treasury ETFs of 2023 

The best Treasury ETFs of 2023, as measured by performance through Oct. 27, include a diverse mix of actively managed funds, emerging-markets currency funds, cash alternatives and floating-rate ETFs. 

Best Treasury ETFs of 2023 

TickerFundYTD ReturnAUMExpense Ratio
HIGHSimplify Enhanced Income ETF6.60%$141.0M0.51%
FEMBFirst Trust Emerging Markets Local Currency Bond ETF6.50%$129.8M0.85%
CSHINEOS Enhanced Income Cash Alternative ETF4.99%$209.7M0.38%
USFRWisdomTree Floating Rate Treasury Fund4.38%$18.57B0.15%
TFLOiShares Treasury Floating Rate Bond ETF4.31%$10.77B0.15%

Total return (NAV) data as of Oct. 27, 2023. Pure inverse ETFs were eliminated from our search. 

Check out etf.com analyst Sumit Roy’s interview with Simplify CEO Paul Kim on how the HIGH ETF generates such lofty yields.  

The Outlook on Treasury Bonds and ETFs

The outlook on Treasury bonds and ETFs for 2023 and 2024 is mixed. While yields can go higher, many Treasuries across the yield curve are at highs not seen since 2007. Prices, which move in the opposite direction as yields, are at historic lows. If the economy slows in 2024, as many analysts, economists and declining economic indicators predict, Treasury yields would fall, and prices would rise.

Here are potential impacts on the outlook for Treasury bonds and ETFs: 

  • Investor sentiment and speculation: The primary driver for the outlook on Treasury bonds is that investors are concerned about the impact of inflation on their purchasing power in a “higher-for-longer” scenario. Investor perceptions and market dynamics can have a short-term impact on Treasury bond prices and yields. If inflation is expected to rise, investors will demand higher yields on bonds to protect their future returns from being eroded by inflation. Factors like speculation and trading volumes can also influence prices. 
  • Supply and demand: Another concern is the supply of Treasury bonds, which is influenced by the U.S. Department of the Treasury's issuance of new bonds through auctions. With a recent rise in supply combined with lower demand at bond auctions, prices have been pushed lower. The demand for these bonds can vary based on factors like market conditions, investor sentiment and economic indicators. 
  • U.S. creditworthiness and geopolitical tensions: Other wild cards include a concern over U.S. creditworthiness amid potential government shutdowns, as well as heightened geopolitical tensions worldwide, with wars in the Ukraine and Gaza and Israel.  

Bottom Line on Treasury Bonds and ETFs 

It's important to note that many factors influencing Treasury yields and prices are interrelated and can change rapidly, leading to yield and price fluctuations. Investors should consider their investment objectives and risk tolerance when making decisions related to Treasury bonds and related ETFs and understand the potential risks and rewards associated with them. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.