Schwab Intermediate-Term U.S. Treasury ETF (SCHR) seeks to track the Bloomberg U.S. Treasury 3-10 Year Index, which measures the performance of U.S. Treasury securities with remaining maturities between 3 and 10 years. This government bond ETF provides exposure to intermediate-duration Treasury debt backed by the full faith and credit of the U.S. government.
How It Works
SCHR uses a passively managed, market-value-weighted approach that holds U.S. Treasury bonds and notes with maturities spanning 3-10 years. The fund maintains an average duration of approximately 5-6 years and rebalances monthly to align with index changes as bonds mature or new issues are added. Holdings consist entirely of direct U.S. government obligations, with no corporate bonds, mortgage-backed securities, or other credit instruments included in the portfolio.
Key Features
- Zero expense ratio makes it one of the lowest-cost Treasury ETFs available, saving investors significant fees over time
- Intermediate duration provides balanced exposure between short-term stability and long-term yield potential compared to other Treasury ETFs
- 3.23% dividend yield offers attractive income generation while maintaining government-backed principal protection
Risks
- This ETF loses value when interest rates rise, with intermediate duration bonds typically declining 4-6% for each 1% rate increase
- Inflation erodes purchasing power of fixed coupon payments, making real returns negative during high inflation periods like 2021-2022
- While principal is government-guaranteed at maturity, market value fluctuates daily and can decline significantly during rate hiking cycles
Who Should Own This
Best suited for conservative investors with 2-7 year time horizons seeking steady income and capital preservation with low credit risk. Appropriate as a core bond holding (20-40% of fixed income allocation) for those with low-to-medium risk tolerance. Works well for retirees needing predictable income or as a defensive allocation during equity market uncertainty.