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Bank Scare, Uncertain Fed Raise Appeal for Cash-Like ETFs
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The current stock market turmoil triggered by banking woes and huge uncertainty over the Fed’s rate hike path has made investors jittery, raising demand for cash-like ETFs. These funds invest in short-term bonds and help investors in keeping aside money for a couple of weeks to a few months with almost no risk.
While there are almost two dozen ETFs in this space, investing in popular ones could be compelling. These are SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) , JPMorgan Ultra-Short Income ETF (JPST - Free Report) , iShares Short Treasury Bond ETF (SHV - Free Report) , iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) , and PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report) .
These funds invest in short-term bonds and look lucrative. In fact, these will help investors in keeping aside money for a couple of weeks to a few months with almost no risk.
Banking Woes
The series of bad news in the banking sector has sent shockwaves across the global market. The turmoil started with the collapse of the Silicon Valley Bank — a firm that specializes in venture-capital financing — which is regarded as the biggest failure since the collapse of Washington Mutual in 2008 (read: 3 ETF Areas Likely to be in Tight Spots Post Banking Crisis).
The Silvergate Capital Corp., one of the crypto market’s top banks, also collapsed. The bank from California said that it plans to shut down its operations and liquidate after the crypto industry’s meltdown sapped the company’s financial strength. Signature Bank became the third financial institution to close on Mar 12, after regulators said that keeping the bank open could threaten the stability of the entire financial system.
Then, Credit Suisse aggravated concerns in the banking sector, sparking a fresh selloff. Shares of Credit Suisse fell as much as 30% to an all-time low on Mar 15 after its largest shareholder ruled out any more investment in the bank.
Fed Uncertainty
Rounds of strong economic data and the prevalent inflation have put a steeper-than-expected rate hike back on the table. Fed Chair Jerome Powell turned hawkish during his testimony to the Senate Banking Committee and opened the door to a half-point rate hike in March. The central bank would likely raise its key interest rate higher than anticipated and resume larger hikes, citing a recent surge in job growth and persistent inflation (read: 4 Top Sector ETFs to Gain as Fed Signals Faster Rate Hikes).
However, the banking scare has stoked hopes of a less aggressive Federal Reserve. Futures traders are now divided on what the Fed’s next move will be. About half of the bets are that there won’t be an interest rate move next week, while another half believes that the central bank will raise rates by a quarter of a percentage point, according to CME’s FedWatch tool.
SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 19 securities in its basket. Both average maturity and adjusted duration come in at 0.12 years.
SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28 billion and an average daily volume of 7.3 million shares. It charges 14 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
JPMorgan Ultra-Short Income ETF invests mainly in investment-grade, U.S. dollar-denominated fixed, variable and floating-rate debt. It holds 554 bonds in its basket with an average duration of 0.60 years.
iShares Short Treasury Bond ETF provides exposure to U.S. Treasury bonds that mature in less than a year. It follows the ICE Short US Treasury Securities Index and holds 28 securities in its basket, with an average maturity of 0.39 years and an effective duration of 0.38 years.
iShares Short Treasury Bond ETF has amassed $24.2 billion in its asset base while trading in a solid volume of 3.3 million shares a day. It charges 15 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares 0-3 Month Treasury Bond ETF offers exposure to U.S. Treasury bonds with remaining maturities less than or equal to three months. iShares 0-3 Month Treasury Bond ETF follows the ICE 0-3 Month US Treasury Securities Index with an average maturity of 0.10 years and an effective duration of 0.09 years.
iShares 0-3 Month Treasury Bond ETF has AUM of $9 billion and trades in an average daily volume of 2.2 million shares. SGOV charges 5 bps in annual fees and has a Zacks ETF Rank #3.
PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report)
PIMCO Enhanced Short Maturity Active ETF is actively managed that seeks greater income and total return potential than traditional cash investments in exchange for a modest increase in risk. It primarily invests in short-duration investment-grade debt securities. PIMCO Enhanced Short Maturity Active ETF holds 643 securities in its basket, with an average maturity of 0.53 years and effective duration of 0.45 years.
PIMCO Enhanced Short Maturity Active ETF has accumulated $8.8 billion in its asset base while trading in a solid volume of around 879,000 shares a day. It charges 35 bps in annual fees.
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Bank Scare, Uncertain Fed Raise Appeal for Cash-Like ETFs
The current stock market turmoil triggered by banking woes and huge uncertainty over the Fed’s rate hike path has made investors jittery, raising demand for cash-like ETFs. These funds invest in short-term bonds and help investors in keeping aside money for a couple of weeks to a few months with almost no risk.
While there are almost two dozen ETFs in this space, investing in popular ones could be compelling. These are SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) , JPMorgan Ultra-Short Income ETF (JPST - Free Report) , iShares Short Treasury Bond ETF (SHV - Free Report) , iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) , and PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report) .
These funds invest in short-term bonds and look lucrative. In fact, these will help investors in keeping aside money for a couple of weeks to a few months with almost no risk.
Banking Woes
The series of bad news in the banking sector has sent shockwaves across the global market. The turmoil started with the collapse of the Silicon Valley Bank — a firm that specializes in venture-capital financing — which is regarded as the biggest failure since the collapse of Washington Mutual in 2008 (read: 3 ETF Areas Likely to be in Tight Spots Post Banking Crisis).
The Silvergate Capital Corp., one of the crypto market’s top banks, also collapsed. The bank from California said that it plans to shut down its operations and liquidate after the crypto industry’s meltdown sapped the company’s financial strength. Signature Bank became the third financial institution to close on Mar 12, after regulators said that keeping the bank open could threaten the stability of the entire financial system.
Then, Credit Suisse aggravated concerns in the banking sector, sparking a fresh selloff. Shares of Credit Suisse fell as much as 30% to an all-time low on Mar 15 after its largest shareholder ruled out any more investment in the bank.
Fed Uncertainty
Rounds of strong economic data and the prevalent inflation have put a steeper-than-expected rate hike back on the table. Fed Chair Jerome Powell turned hawkish during his testimony to the Senate Banking Committee and opened the door to a half-point rate hike in March. The central bank would likely raise its key interest rate higher than anticipated and resume larger hikes, citing a recent surge in job growth and persistent inflation (read: 4 Top Sector ETFs to Gain as Fed Signals Faster Rate Hikes).
However, the banking scare has stoked hopes of a less aggressive Federal Reserve. Futures traders are now divided on what the Fed’s next move will be. About half of the bets are that there won’t be an interest rate move next week, while another half believes that the central bank will raise rates by a quarter of a percentage point, according to CME’s FedWatch tool.
ETFs in Focus
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report)
SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 19 securities in its basket. Both average maturity and adjusted duration come in at 0.12 years.
SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28 billion and an average daily volume of 7.3 million shares. It charges 14 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
JPMorgan Ultra-Short Income ETF (JPST - Free Report)
JPMorgan Ultra-Short Income ETF invests mainly in investment-grade, U.S. dollar-denominated fixed, variable and floating-rate debt. It holds 554 bonds in its basket with an average duration of 0.60 years.
JPMorgan Ultra-Short Income ETF has AUM of $25.2 billion in its asset base while trading in a good volume of around 6 million shares a day. It charges 18 bps in annual fees (read: 4 Safe ETFs to Invest to Counter Global Financial Market Crisis).
iShares Short Treasury Bond ETF (SHV - Free Report)
iShares Short Treasury Bond ETF provides exposure to U.S. Treasury bonds that mature in less than a year. It follows the ICE Short US Treasury Securities Index and holds 28 securities in its basket, with an average maturity of 0.39 years and an effective duration of 0.38 years.
iShares Short Treasury Bond ETF has amassed $24.2 billion in its asset base while trading in a solid volume of 3.3 million shares a day. It charges 15 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report)
iShares 0-3 Month Treasury Bond ETF offers exposure to U.S. Treasury bonds with remaining maturities less than or equal to three months. iShares 0-3 Month Treasury Bond ETF follows the ICE 0-3 Month US Treasury Securities Index with an average maturity of 0.10 years and an effective duration of 0.09 years.
iShares 0-3 Month Treasury Bond ETF has AUM of $9 billion and trades in an average daily volume of 2.2 million shares. SGOV charges 5 bps in annual fees and has a Zacks ETF Rank #3.
PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report)
PIMCO Enhanced Short Maturity Active ETF is actively managed that seeks greater income and total return potential than traditional cash investments in exchange for a modest increase in risk. It primarily invests in short-duration investment-grade debt securities. PIMCO Enhanced Short Maturity Active ETF holds 643 securities in its basket, with an average maturity of 0.53 years and effective duration of 0.45 years.
PIMCO Enhanced Short Maturity Active ETF has accumulated $8.8 billion in its asset base while trading in a solid volume of around 879,000 shares a day. It charges 35 bps in annual fees.