Compare the best stock brokers for ETF investing and for buying iShares 7-10 Year Bond (IEF) ETF. For more information on ETFs you can read our guide to buying ETFs here.

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IG

General Account:
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ETFs:
Account Fee: £0
Regular: £8
Discount: £3
US Shares: £0
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Your capital is at risk.

Hargreaves Lansdown

General Account:
SIPP:
ISA:
Derivatives:
UK Shares:
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Funds:
ETFs:
Account Fee: £0
Regular: £11.95
Discount: £5.95
US Shares: £11.95
Open Account

Freetrade

General Account:
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ETFs:
Account Fee: £0
Regular: £9.99 p/m
Discount: £0
US Shares: £0
Open Account

Saxo Capital Markets

General Account:
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ETFs:
Account Fee: £0
Regular: 0.10%
Discount: 0.05%
US Shares: 2c per share
Open Account

AJ Bell

General Account:
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ETFs:
Account Fee: 0.25%
Regular: £9.95
Discount: £4.95
US Shares: £9.95
More Info
Capital at risk
Interactive Brokers

Interactive Brokers (IBKR)

General Account:
SIPP:
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ETFs:
Account Fee: £0
Regular: 0.05%
Discount: 0.015%
US Shares: 0.035%
Open Account
Interactive Investor General Account:
SIPP:
ISA:
Derivatives:
UK Shares:
US Shares:
Funds:
ETFs:
Account Fee: £9.99
Regular: £7.99
Discount: £3.99
US Shares: £4.99
Open Account
Fineco General Account:
SIPP:
ISA:
Derivatives:
UK Shares:
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Funds:
ETFs:
Account Fee: £0
Regular: £2.95
Discount: £2.95
US Shares: $3.95
Open Account
 

iShares 7-10 Year Treasury Bond ETF FAQ

What is the iShares 7-10 Year Treasury Bond ETF (IEF)?

This instrument is an exchange-traded fund (ETF, see ETF Guide) that tracks a bond index of US government bonds. The index is ICE U.S. Treasury 7-10 Year Bond Index. These government bonds have maturities longer than 7 years but no greater than 10 years.

What this ETF does is to buy all the bond constituents of the index and hold it over time. The number of constituents is 18. So when you buy the shares of IEF you are actually buying a share in a basket of government bonds. This is a good way to diversify your holdings of bonds.

Can you trade iShares Treasury Bond IEF?

Of course you can. In fact, this is one of the favourite bond ETFs that traders invest in. First, IEF is a large fund with $18 billion assets under management. (see IEF's factsheet). Investors like this because it offers long-term stability. They assumed that, due to its large size, this bond ETF will not disappear overnight.

Second, IEF offers a targeted exposure of the US Treasury market. (see the related guide on TLT, which tends to hold bond securities longer than 20 years).

Investors can hold long-term positions here; while traders may buy and sell over a short period. Interestingly, IEF offers enough price volatility for both type of players. You can trade it exactly like shares.

Look at IEF's one-year bar chart. Its price range is about 112-114, with plenty of rallies and corrections in between this range (see right). Prices accelerated upwards in July/August as investors stampeded into bonds. Prices have been softening since.

What is the attraction of iShares IEF?

iShares Treasury Bond ETF is basically a bond fund.

Bonds are attractive to investors. Simply because they offer diversification benefits to investors. A bond tends to be more stable than, say, a stock because bond prices are not as volatile as stock prices.

Moreover, a bond pays the holder a fixed sum of interest over time. Many insurers and pension funds love this feature because it helps them out of their own obligations such as pension payments. A stock may cut its dividend when business is down.

Lastly, bonds also offer opportunities for capital growth. Look at IEF's long-term capital growth (from its own factsheet). Stable and positive for long periods of time. $10,000 invested in the ETF 18-20 years ago would have doubled. The ETF's 10-year average annual return equates to 4.3% (see below).

Source: iShares

What drives the iShares Treasury Bond TLT?

Bond prices, however, are not static. They fluctuate like every other assets. Three factors particularly impact bonds:

  • Interest rates - As the level of interest rates fluctuates, so will bond prices. If interest rates fall, bond prices will go up - and vice versa. Bond prices move inversely to interest rates. In 2019, interest rate plummeted, which elevated bond prices.
  • Inflation - Investors does not like to hold bonds when inflation rises because it reduces the purchasing power of capital over time. $100 today will not have the same buying in five years time. If inflation goes up, bond prices are likely to come down. This because investors avoid these fixed income securities.
  • Default risk - The bond issuer may suffer cash flow problems and not pay its bondholders in full. For sovereign bonds, the rise in this risk is reflected in its credit ratings. (Note: Credit ratings are opinions assigned by credit agencies on the creditworthiness of the bond issuer. AAA is the best rating available.)

When one or more of these factors happen, bond prices will move accordingly.

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