Move to the Ultra-Short End of the Maturity Curve With CLTL and PVI

Ultra-short treasuries are becoming more relevant and attractive in the current environment than in years past. 

As advisors look to bolster portfolios with fixed income ETFs, the lesser-known Invesco VRDO Tax-Free ETF (PVI) and the Invesco Treasury Collateral ETF (CLTL) should be considered. 

CLTL is a vanilla, low-cost offering, charging just 8 basis points. The fund combines the safety of debt backed by the U.S. government with an ultra-short-term portfolio that guards against interest rate increases.

CLTL is based on the ICE U.S. Treasury Short Bond Index and will invest at least 80% of its total assets in the components of the index. The index measures the performance of U.S. Treasury Obligations with a maximum remaining term to maturity of 12 months. 

CLTL does not purchase all of the securities in the Index; instead, the Fund utilizes a “sampling” methodology to seek to achieve its investment objective. CLTL and the index are rebalanced and reconstituted monthly, according to Invesco.

PVI offers exposure to the ultra-short end of the maturity curve, focusing on tax-exempt Variable Rate Demand Obligations, or VRDOs. VRDOs trade as short-term municipal money market securities with zero duration.

PVI, which charges 25 basis points, has been around since 2007 but is seeing a resurgence in investor interest in the current rising interest rate environment. 

PVI is essentially a tax-exempt muni money market ETF, meaning it has virtually no interest rate risk and weekly resets. Those resets have become much more attractive in the current environment, offering around 2.5%, according to Invesco. On a taxable equivalent yield, that’s over 4%.

PVI is based on the ICE US Municipal AMT-Free VRDO Constrained Index. Similarly to CLTL, PVI utilizes a “sampling” methodology to seek to achieve its investment objective. The fund is rebalanced on the last calendar day of the month.

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