Treasuries can still be volatile, but typically are not as volatile as they have been in the last 36 months. HBND is Canada's first covered call bond ETF and targets an initial yield of 10%+ monthly. It provides exposure to US treasury bonds, has a 0.45% MER, and does not use leverage. It uses a covered call strategy on its underlying holdings to deliver the monthly yield, and its holdings are quite concentrated with 80% exposure to long-term bonds (TLT and VGLT), 10% intermediate-term bonds (VGIT), 5% short-term bonds (SCHO), and 5% 1-3 month bonds (BIL). The premiums on covered calls are taxed as capital gains, and thus this can be more tax-efficient than income from bonds.
From an income perspective, this ETF can do very well for monthly distributions if rates are rising - the yields on its underlying bond holdings will increase as well as the call premiums it collects (as the prices of bonds will fall). Although, this (higher rates) implies its unit price will fall because the bonds its owns will decline in value with higher rates. On the other hand, if rates stagnate or decline, yields on the underlying holdings will fall, and bond prices will rise causing its income from call premiums to shrink, but the unit prices will likely appreciate.
We feel that this ETF will best perform in a rising interest rate environment, as it benefits from both covered call premiums and rising yields, however, in a falling yield environment it has both the headwind of declining yields on its bonds and rising prices (call premiums will be impacted).