The Vanguard Extended Duration Treasury ETF (EDV) Explained
What is the Vanguard Extended Duration Treasury ETF (EDV)?
The Vanguard Extended Duration Treasury ETF (EDV) is a low-cost, index-tracking fund that concentrates on one thing: very long-dated U.S. Treasury STRIPS. That niche focus makes it simple to understand but powerful in practice. When interest rates fall, EDV’s price tends to rise sharply; when rates rise, it can fall just as hard. It’s designed to mirror the Bloomberg U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index and is managed passively by Vanguard’s Fixed Income Group, keeping costs tight and exposure consistent with the benchmark.
What EDV Tracks and Holds
EDV owns zero-coupon U.S. Treasury securities known as STRIPS, which are “stripped” into principal and interest components. Because these bonds don’t pay coupons and all cash flows are far in the future, they exhibit very high duration—meaning price sensitivity to interest-rate moves is magnified. Morningstar estimates EDV’s effective duration around the mid‑20s in years, implying a roughly similar percentage move in net asset value for a 1 percentage point change in rates, up or down. Practically, that makes EDV a potent, rate-sensitive instrument built on full-faith-and-credit Treasuries.
Key Characteristics
As of recent fund disclosures, EDV carries an expense ratio of 0.05%, reflecting Vanguard’s cost discipline. The fund shows a 30‑day SEC yield near 5.10% (a point‑in‑time snapshot), holds about 80 securities, and sits around 24 years in both average duration and effective maturity. Assets are in the multibillion‑dollar range, and the 52‑week price range has been wide, underscoring volatility inherent to long bonds. The portfolio is comprised of U.S. Treasury STRIPS, which aligns with the highest surveyed credit quality (AAA) in category context.
Performance Behavior Across Cycles
If you look at long-run return history, EDV has produced some of the largest swings in the bond ETF universe. It surged in stress and deflationary episodes—examples include 2008 and 2011—while suffering in sharp rate‑rise periods like 2013 and 2022. More recently, 2014 was another standout positive year, whereas 2024 was notably negative. These extremes flow directly from EDV’s long duration and zero‑coupon structure. As always, past performance does not guarantee future results; rate paths and inflation surprises dominate the ride.
Where EDV Can Fit in a Portfolio
Think of EDV as a precise tool rather than a core bond holding. In our asset allocation model, we use EDV as a way to produce alpha, through the direction of US interest rates. Alpha is an asset’s return that is higher than that of the general market. It can serve as a hedge for scenarios where you expect falling rates, disinflation, or a risk‑off flight to quality. It may also diversify equity risk during recessions, when long Treasuries often rally as stocks sell off. Because of the high duration, some investors use EDV in a “barbell” with cash or short‑term Treasuries to balance volatility while retaining convexity to rate declines. The key is aligning EDV with a clear macro view or a defined risk‑management role.
Primary Risks to Understand
Interest‑rate risk dominates EDV. Compared with the Long Government category overall, EDV’s duration sits significantly higher—around 24 years versus a category figure closer to the mid‑teens—so price movements can be large in either direction and over short windows. That translates to deeper drawdowns when inflation runs hot or policy rates rise, and faster rebounds when the rate outlook eases. Credit risk is minimal given Treasuries, but volatility risk is real. The ETF wrapper helps with tradability; recent data show tight trading spreads around a few basis points, though spreads can widen in turbulent markets.
Practical Buying Considerations
For most investors, EDV makes the most sense as a deliberate satellite position sized to your risk tolerance and time horizon. Liquidity is generally solid with meaningful average daily volume, and the median bid/ask spread has tended to be very low, aiding efficient execution for limit orders and staged entries. The SEC yield is useful for comparing with peers but is not a guarantee of future distributions; with STRIPS, total return is heavily driven by rate moves. If you’re anchoring a portfolio to long Treasuries, compare EDV’s zero‑coupon structure and greater convexity with coupon‑paying alternatives to ensure you’re getting the specific exposure you want.
How EDV Compares Conceptually
Versus broad bond funds, EDV is more concentrated, more volatile, and more directional on rates. Versus standard long‑Treasury ETFs, EDV typically sits even further out the curve because STRIPS push duration higher than comparable coupon bonds. That difference can be an advantage when rates fall quickly, because price appreciation accelerates; it’s a disadvantage when rates surprise higher. Knowing that tradeoff upfront helps you avoid using EDV as a generic “bond diversifier” and instead as a targeted rate bet or crash hedge you actively monitor.
Bottom Line
EDV offers clean, low‑cost access to the longest part of the U.S. Treasury curve via zero‑coupon STRIPS. It’s built for investors who want maximum sensitivity to interest‑rate declines and a potential ballast in deep risk‑off environments—not for those seeking steadier bond income or muted volatility. If you decide to use it, size it thoughtfully, pair it with short duration or cash if needed, and keep your thesis tied to inflation and policy rate trajectories. With the right intent and discipline, EDV can be a sharp tool in your fixed‑income toolkit.
That’s all for the fixed income ETFs in our asset allocation model. Tomorrow, we shift to real assets and continue our series with an analysis of the Vanguard Real Estate ETF (VNQ). Until then, be well and stay safe!
