PIMCO ZROZ Plummets to All-Time Low Amid Generational Sell-Off

The PIMCO US Treasury bond ETF (ZROZ) has hit an all-time low, trading at $53.73 after a 16% decline in share price this year. Over the past 12 months, it lost 21%, and over the past five years, it plummeted by 63%. The current price is also down 73% from its March 2020 peak.

The ETF tracks an index of the present value of US Treasury bonds' principal repayments, which are guaranteed by the US government. Historically, investors have valued these long-term principal repayments highly due to their security and safety.

However, with rising interest rates on modern-day US Treasuries, such as those maturing in 30 years paying 5.64% annually, investors now prefer owning regular bonds that pay interest over STRIPS (Separate Trading of Registered Interest and Principal of Securities), which do not pay interest but offer a guaranteed principal repayment at maturity.

The collapse of the present value of long-term US Treasury principal repayments is largely due to a generational sell-off in zero-coupon bonds, specifically those with 25-30 year maturities. This shift has led investors to abandon ZROZ and instead opt for more attractive investments that provide higher returns.