Diamond NestEgg: 7-8% Treasury Yields: IS Buck ETF Too Good To Be True?

Investors looking for safety should start with the U.S. Treasury market. In the financial world, U.S. Treasuries are considered a risk-free asset.

That’s because they’re backed by the United States government. That could mean backing in the form of tax receipts. Or the ability to print U.S. dollars, still the world’s reserve currency. Either way, Treasuries are a benchmark for the entire fixed-income market. Investors and traders alike are wise to track current yields and trends higher or lower.

While Treasury bonds come in a variety of durations and styles, it’s easier for most investors to buy an ETF for instant diversification. Some ETFs use more advanced strategies, which can help boost returns on Treasury ownership.

For instance, the Simplify Treasury Option Income ETF (BUCK), currently offers a yield in the high 7% range. That’s far higher than the 4-5% return on simple Treasuries right now.

That’s the good news. Plus, Buck largely holds bills with a duration of one year or less. That leaves them with less interest rate risk compared to a 30-year bond.

From there, BUCK will use tools like covered calls to provide more income. That higher risk does come with higher returns. But if the options strategy is poorly executed, investors could see some short-term losses.

To see the full advantages and disadvantages to leveraged Treasury holdings, click here.