GOVZ ETF

Investing in STRIPS, especially through the iShares 25+ Year Treasury STRIPS Bond ETF, offers a pure play on long-term interest rates without regular coupon payments. GOVZ holds U.S. Treasury STRIPS with an average maturity of 27.21 years, making it highly sensitive to interest rate changes and ideal for targeting specific durations. GOVZ's unmatched duration exposure is beneficial for investors predicting long-term rate drops, though it carries significant risks if rates rise due to its high sensitivity.

We have highlighted three ETFs each from the best and worst-performing zones of last week.

On our last update on GOVZ, we gave it a Strong Sell based on our outlook for no rate cuts. GOVZ has underperformed SPY by 80% on an annualized basis and that is one of the largest on record. We look at where things stand and update our thesis.

iShares 25+ Year Treasury STRIPS Bond ETF provides exposure to the principal portion of Treasury STRIPS. It is a passive ETF that has tracked its index impressively. We review the fund and tell you why the setup for long duration bonds is poor and what alternatives you should consider.

GOVZ is exposed to a major duration factor that speculators can use for their portfolio building. GOVZ consists of zero-coupon bonds with a duration of almost 27 years, making it highly sensitive to changes in interest rates. With the current inflationary pressures and the likelihood of higher long-term rates, GOVZ is very risky until rates have likely peaked. Nothing points to the upside for GOVZ as of now.