The SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL), a conservative, cash equivalent exchange traded fund, is luring investors in a big way.
“BIL seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index. As such, it’s among the ETFs that share the MMF objective of providing liquidity to capital through short duration high quality investments,” according to State Street Global Advisors (SSgA).
Changes in the yield curve may help explain performance in bond ETFs with varying durations. Specifically, it is possible for short-term interest rates to rise while long-term rates to remain the same or even fall, reflecting a flattening yield curve. Last week, investors allocated $580 million to BIL, good for the highest total among all US-listed bond ETFs.
“BIL was an outlier among U.S.-listed fixed-income products, which suffered net outflows of nearly $1.2 billion last week. Its newfound appeal may be linked to its dividend yield, which has jumped to its highest level since 2008 amid heavy supply and continued gradual tightening anticipated from the Federal Reserve,” reports Bloomberg.
The $2.87 billion BIL has 10 holdings and an option-adjusted duration of just 0.13 years. Duration measures a bond’s sensitivity to changes in interest rates. BIL has a 30-day SEC yield of 1.18% and a yield to maturity of 1.47%.
“Last week’s haul marks the largest inflow for this fund since August 2015, when China’s shock devaluation of the yuan fueled a simultaneous selloff in stocks as well as longer-dated Treasuries,” according to Bloomberg. Increased appetite for short-term U.S. debt comes at just the right time: ahead of record issuance of three- and six-month bills by the Treasury this week.
BIL charges 0.136% per year, or $13.60 on a $10,000 investment.
For more information on Fixed-Income ETFs, visit our Fixed-Income category.