Elevated equity market volatility in October had investors seeking refuge in short-term Treasuries and the related exchange traded funds, including the SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL).
BIL tracks the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index and “seeks to provide exposure to zero coupon U.S. Treasury securities that have a remaining maturity of 1-3 months,” according to State Street Global Advisors (SSgA).
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.
“The SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, ticker BIL, had the largest inflow since 2011 on Monday, with $581 million coming in. The fund has attracted more than $1.7 billion this month, putting it on track for the largest monthly inflow since August 2011,” reports Bloomberg.
Another Treasury Investing Idea
In addition to BIL, the Goldman Sachs Treasury Access 0-1 Year ETF (NYSEArca: GBIL) has also been attracting new money.
GBIL, which is two years old, looks to reflect the performance of the Citi US Treasury 0-1 Year Composite Select Index, which is comprised of U.S. Treasury Obligations with a maximum remaining maturity of 12 months. U.S. Treasury obligations refer to securities issued by the U.S. Treasury where payment of principal and interest is backed by the U.S. government.
“The Goldman Sachs Access Treasury 0-1 Year ETF, or GBIL, has also seen high inflows, with around $110 million coming in since Oct. 22,” according to Bloomberg.
Related: 6 Safe Bond ETFs to Park Your Money
The $5.25 billion BIL has an option adjusted duration of just 0.08 years. The $2.45 billion GBIL has an effective duration of 0.39 years.
“The surge of cash comes as the S&P 500 Index has fallen 7 percent in October, putting it on track for its biggest monthly decline since September 2011. As a result, equity investors are turning their eyes to the perceived safety of U.S. government debt. On top of that, fixed-income investors are shortening the duration of their Treasury bets as the Fed continues to raise interest rates,” according to Bloomberg.
For more information on the fixed-income markets, visit our bond ETFs category.