Vanguard's EDV fund offers leveraged exposure to long-term Treasury yields, risky but rewarding if rates fall.

The Vanguard Extended Duration Treasury Index Fund (EDV) invests in zero-coupon Treasury STRIPS with maturities of 20 to 30 years, making it highly sensitive to changes in long-term interest rates. It acts like a leveraged bet on falling long-term yields without actual leverage, gaining value significantly if yields drop but losing heavily if yields rise. Over the past five years, EDV has declined due to rising rates, but it can provide outsized gains in a Fed easing cycle. Investors should use EDV tactically as a hedge against recession or disinflation, understanding its high volatility and risks, rather than as a core bond holding.