Mounting concerns regarding growing U.S. government deficits and a volatile tariff policy create a challenging backdrop for U.S. bonds. Those investors looking to capture core bond exposure but with the benefits of active management should consider the T. Rowe Price QM U.S. Bond ETF (TAGG).
Weakening demand for U.S. Treasuries in the most recent auction reflects broad investor concerns of U.S. stability. The House budget bill, currently making its way through the Senate, would further balloon already significant U.S. deficits. In addition to worries over escalating U.S. debts, constant changes to U.S. economic and global trade policy create a morass of uncertainty looking ahead.
In an environment of heightened volatility and uncertainty, active strategies could prove a boon. The ability to be selective as well as responsive to unfolding narratives lends itself well to the rapidly shifting tides of 2025. The actively managed TAGG currently outperforms the benchmark while providing familiar risk profiles for core bond investors.
The fund seeks to outperform the Bloomberg U.S. Aggregate Bond Index. It does so while offering a similar risk profile as the benchmark, making it a notable addition to core bond portfolios. A competitive management fee of just 0.08% makes it an appealing strategy for challenging markets.
The fund currently boasts over $1 billion in AUM and invests in U.S. government debt, investment-grade bond corporate bonds, asset-backed securities, municipal bonds, and other bonds. In keeping with a similar profile to the benchmark, TAGG offers intermediate to long-term maturity exposure.
The fund managers combine fundamental analysis and quantitative models when constructing the aggregate portfolio. While the overall portfolio offers similar characteristics to the AGG, individual security and sector weights may differ. TAGG carried less of an overweight to U.S. Treasuries and a higher overweight to investment-grade corporate bonds compared to the AGG, as of the end of March 2025.
The average weighted duration of TAGG was 6.09 years as of April 30, 2025, and the weighted average maturity was 8.78 years. While it invests primarily in the U.S. (95.45% as of April 30, 2025), the strategy does carry international exposures, including the United Kingdom (1.01%) and Canada (0.92%). TAGG also invests in futures, including interest rate futures, as well as forwards and swaps to maintain the desired duration profile.
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