CIO Tom Graff Quoted by TheStreet Pro on Bond ETF Mechanics
TheStreet Pro turned to Facet’s Tom Graff, CFA, to explain what consumers need to understand about bond ETFs.
The day of maturity has no special properties. In fact, the last year of a bond is usually its worst yielding year. So as a bond ages naturally, its yield is declining. That actually results in small price appreciation as the bond goes from five years to four years to three years to maturity. By the time you get to the last year, there’s no appreciation left to be had. The supposed safety is entirely psychological.