Schwab Long-Term U.S. Treasury ETF (SCHQ) seeks to track the performance of long-term U.S. Treasury bonds, which are government-issued debt securities with maturities typically ranging from 10 to 30 years. This fixed income ETF provides exposure to the highest credit quality bonds backed by the full faith and credit of the U.S. government.
How It Works
SCHQ uses a passively managed approach that holds a diversified portfolio of long-term U.S. Treasury securities with varying maturity dates. The fund maintains a dollar-weighted average maturity of approximately 15-25 years and rebalances periodically to maintain target duration exposure. Holdings are weighted by market value of outstanding Treasury issues, with newer bonds typically receiving larger allocations. The portfolio excludes Treasury Inflation-Protected Securities (TIPS) and focuses solely on nominal Treasury bonds.
Key Features
- Zero expense ratio makes it one of the lowest-cost ways to access long-term Treasury exposure
- High duration of 15+ years amplifies both gains and losses from interest rate movements
- 3.77% dividend yield provides regular income distributions from Treasury coupon payments quarterly
Risks
- This ETF can lose significant value when interest rates rise, potentially declining 15-20% for each 1% rate increase due to high duration
- Long-term bonds are highly sensitive to inflation expectations, losing purchasing power when inflation accelerates faster than yields
- Despite government backing, bond prices fluctuate daily and can experience multi-year periods of negative returns during rate cycles
Who Should Own This
Best suited for conservative investors with 3-10 year time horizons seeking high-quality income and portfolio diversification. Low-to-medium risk tolerance required due to interest rate sensitivity. Works as a defensive allocation (10-30% of portfolio) during economic uncertainty or as a hedge against equity volatility in balanced portfolios.