Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

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hdas
Posts: 317
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Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by hdas » Thu Nov 08, 2018 11:37 am

This is a query to ppl who have a significant portion of their allocation to this ETF. Say > $100k at min. How is your experience??

- Do you do frequent re-balancing?
- Can you do the above at decent prices despite the poor liquidity?
- Do you track how much are you paying in "slippage" due to low liquidity?
- Do you have experience with TLT (Ishares 20+Bonds), how does it compare in terms of slippage of your execution?

Thanks

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vineviz
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Re: Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by vineviz » Thu Nov 08, 2018 12:10 pm

hdas wrote:
Thu Nov 08, 2018 11:37 am
This is a query to ppl who have a significant portion of their allocation to this ETF. Say > $100k at min. How is your experience??

- Do you do frequent re-balancing?
- Can you do the above at decent prices despite the poor liquidity?
- Do you track how much are you paying in "slippage" due to low liquidity?
- Do you have experience with TLT (Ishares 20+Bonds), how does it compare in terms of slippage of your execution?

Thanks
US treasuries are among the most liquid securities in the world, so it’s not accurate to characterize EDV as “illiquid”.

The average bid-ask spread for EDV is 0.08%, so I’d use that as an estimate of the cost of a round-trip trade, regardless of size.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

hdas
Posts: 317
Joined: Thu Jun 11, 2015 8:24 am

Re: Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by hdas » Thu Nov 08, 2018 12:30 pm

vineviz wrote:
Thu Nov 08, 2018 12:10 pm
US treasuries are among the most liquid securities in the world, so it’s not accurate to characterize EDV as “illiquid”.

The average bid-ask spread for EDV is 0.08%, so I’d use that as an estimate of the cost of a round-trip trade, regardless of size.
Thanks, but I know they are very liquid, that's why 0.08% is an aberration

Right now I can buy 148-18 (148.5625) or $148562.50 of UltraBond futures, paying up the offer. It would cost me $31.25 + $1.00 commission = 0.021%, round trip 0.4%

So EDV is double expensive.

I guess at some point one has to move the tax advantaged accounts to Interactive Brokers.

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vineviz
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Re: Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by vineviz » Thu Nov 08, 2018 12:43 pm

hdas wrote:
Thu Nov 08, 2018 12:30 pm
vineviz wrote:
Thu Nov 08, 2018 12:10 pm
US treasuries are among the most liquid securities in the world, so it’s not accurate to characterize EDV as “illiquid”.

The average bid-ask spread for EDV is 0.08%, so I’d use that as an estimate of the cost of a round-trip trade, regardless of size.
Thanks, but I know they are very liquid, that's why 0.08% is an aberration

Right now I can buy 148-18 (148.5625) or $148562.50 of UltraBond futures, paying up the offer. It would cost me $31.25 + $1.00 commission = 0.021%, round trip 0.4%

So EDV is double expensive.

I guess at some point one has to move the tax advantaged accounts to Interactive Brokers.
With futures you’ve got to roll the contracts at least 2x and probably 4x per year, right?

For a long-term allocation, EDV or ZROZ would be a lot easier to manage and nearly as cheap as managing either futures or a rolling ladder of individual bonds.

If your strategy involves frequent trading, an ETF with narrower spreads (like TLT) would be sensible despite the shorter duration.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

cheezit
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Re: Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by cheezit » Thu Nov 08, 2018 3:26 pm

TLT is more an equivalent of VGLT than EDV, as among those only EDV is zero-coupon, no?

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vineviz
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Re: Liquidity of Vanguard Extended Duration Treasury ETF (EDV)

Post by vineviz » Thu Nov 08, 2018 5:08 pm

cheezit wrote:
Thu Nov 08, 2018 3:26 pm
TLT is more an equivalent of VGLT than EDV, as among those only EDV is zero-coupon, no?
ZROZ (PIMCO 25+ Year Zero Coupon US Treasury ETF) is also zero-coupon, but it has a bid-ask spread (0.24%) much higher than EDV.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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