Outliers are making a comeback in an economy that is rewarding investors for short-term date fixed income ETFs like the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) which has seen $1.3 billion rush into it year-to-date. Here are three reasons why.
$1.3 Billion Flows Into $BIL ETF In 2018
The ability to generate returns in short-dated fixed income ETFs has increased. As a result, money has been flowing into short term treasuries and cash type products to gain interest from investors who are hedging against market risk.
“BIL’s 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.
SPDR Blmbg Barclays 1-3 Mth T-Bill ETF (BIL)
The SPDR® Bloomberg Barclays 1-3 Month T-Bill ETF (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. Despite how conservative BIL is, it has seen a 0.21% return YTD and a yield of 0.75%.
It has seen $599.31 million in flows over the course of the month, which is 44% of the total flows YTD.
Year to date, BIL has seen $1,394.8 billion attracted in new investor interest.
Market risk has caused investors to jump ship on equity ETFs like SPDR S&P 500 ETF Trust (SPY) which has seen $22.8 billion in outflows, iShares MSCI EAFE ETF (EFA) has seen $6.4 billion in outflows, and iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has seen $5.71 billion in outflows.
Here are three reasons why BIL has attracted so much attention.
1. Inflation From Interest Rate Hikes
As the Federal Reserve continues to tighten policy, the ability to generate returns in short-dated fixed income ETFs has increased. As a result, money has been flowing into short term treasuries and cash type products to gain interest from investors.
The median forecast remains for another two rate hikes this year, but a growing number of policymakers foresee three being required to prevent the economy from overheating.
SPDR Blmbg Barclays 1-3 Mth T-Bill ETF (BIL) is less exposed to fluctuations in interest rates than longer duration securities and thus a more secure investment.