Understanding ZROZ: PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF

What this ETF is trying to do

ZROZ is an Exchange-Traded Fund (ETF) designed to track a specific index of U.S. Treasury bonds. These are "zero coupon" bonds with maturities of 25 years or longer. Because these bonds do not pay regular interest like a standard bond, the fund focuses on long-term U.S. government debt.

What the numbers show

The current price of ZROZ is $54.02. When looking at how the share price has moved, we see a downward trend over different time periods:

• Year-to-Date (YTD) Price Return: The share price has fallen by approximately 15.92%.

• One-Year Price Return: The share price has fallen by approximately 19.80%.

• Three-Year Price Return: The share price has fallen by approximately 22.31%.

It is important to distinguish between price return (the change in the share price) and total return (which includes distributions). The total returns for this fund have been higher than the price returns, but they are still negative:

• YTD Total Return: Approximately -12.85%.

• One-Year Total Return: Approximately -15.73%.

• Three-Year Total Return: Approximately -11.16%.

An estimated price from roughly one year ago was $67.36.

Income and distribution explanation

ZROZ provides cash distributions to investors. The trailing distributions over the last year totaled $3.06 per share. The distribution yield is approximately 5.66%. This means the cash paid out represents about 5.66% of the current share price. These payments usually happen quarterly, with four payments recorded in the last 12 months.

While a 5.66% yield might seem high, it is important to remember that a high distribution yield does not guarantee an investor will make money. In this case, the negative total returns show that the share price decline has been larger than the income provided by the distributions.

NAV erosion explanation

The fund has an erosion-risk score of 55, which is labeled as "Moderate price erosion." This indicates that the market price of the shares has been declining.

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion. While we can see the market price is falling, we cannot definitively say if the Net Asset Value (the actual value of the underlying bonds) is eroding based on the facts provided.

Pros

• Provides a distribution yield of approximately 5.66%.

• Offers exposure to long-term U.S. Treasury debt.

Cons

• The fund has experienced significant share-price declines over the last year and three years.

• Total returns have been negative across all measured timeframes provided.

Beginner takeaway

ZROZ is a fund that deals with long-term government debt. While it pays out regular cash distributions, the share price has been dropping significantly. For new investors, it is important to look at "total return" rather than just the "yield" to see how much value the fund is actually gaining or losing.