PIMCO’s ZROZ falls to a record low as long-dated Treasury principal exposure loses appeal

PIMCO’s ZROZ, an exchange-traded fund tied to the principal repayment value of long-dated US Treasuries, fell to an all-time low of $53.73, according to Protos. The fund is down 16% this year, 21% over the past 12 months, 63% over five years, and 73% from its March 2020 peak. Protos said the decline reflects the collapse in the present value of long-term Treasury principal repayments rather than any active management error, because ZROZ passively tracks a US Treasury Principal STRIPS Index covering 25- to 30-year maturities. STRIPS do not pay interest and are typically priced at a discount, even though repayment is backed by the US government. The report noted that higher yields on conventional Treasuries have made a principal-only product less attractive, citing a 5.64% annual yield on current 30-year Treasuries. Protos also said that, excluding dividends, buyers at any point since the ETF’s 2009 inception would be underwater, and that even after accounting for distributions, an investor would have needed to buy before September 2011 to show a profit.