Given the new set of rules imposed by regulators on money market funds, investors could shift cash into safe, ultra-short-term Treasuries and related exchange traded funds.
According to Bank of America Corp. (NYSE: BAC), the new rules could prompt investors to move as much as $500 billion into the shortest-term Treasuries over two years, Bloomberg reports.
Additionally, investors can consider short-duration Treasury bond ETFs to easily navigate the market. For instance, the iShares Short Treasury Bond ETF (NYSEArca: SHV), which has an effective duration 0.44 years and 0.07% 30-day SEC yield, and the SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL), which has a 0.17 year duration and a -0.09% 30-day SEC yield. [Rising Rate Preparation With Short-Term Bond ETFs]
“Whether investors move into government institutional money-market funds or just buy securities themselves, there will be a large demand” for short-dated debt, Jim Lee, head of U.S. derivatives strategy at Royal Bank of Scotland Group Plc’s capital markets unit, said in the article. “That will lower yields.”
Boeing Co. (NYSE: BA) and the state of Maryland are browsing for alternative investment options to avoid potential losses in the money funds market.
“We’re definitely worried about breaking the buck,” Verett Mims, assistant treasurer at Boeing, said in the article. “That’s our biggest problem, the notion of principal preservation.”