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Appeal for Cash-Like ETFs Returns With Fed Rate Hike Bets
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Amid growing anticipation that the Fed will continue to raise interest rates, the appeal for cash-like ETFs returned. This is especially true as iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) pulled in $572 million last week, marking the biggest weekly increase since the banking turmoil in March.
While there are almost two dozen ETFs in this space, investing in the 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 ultra short-term bonds and help investors to keep aside money for a couple of weeks to a few months with almost no risk.
After a pause in rate hikes in the last meeting, the Fed has signaled more interest rate increases this year that could hurt economic growth, and in turn, weigh on the stocks. As inflation remains above the Fed’s target range of 2%, officials indicated there could be two more quarter-percentage-point increases this year.
The latest job data has heightened fears that the central bank may have reason to resume hiking later this month. According to CME Group’s FedWatch tool, traders kept their bets on a resumption in hiking later this month, pricing in a 92% chance of a quarter-point hike on Jul 26 (read: 5 ETF Zones Primed for 2023 Growth Amid Rate Hike Prospects).
Further, economic activity has continued to expand at a modest pace, and the U.S. banking system is also deemed to be sound and resilient. This also spurred bets of more rate hikes.
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 20 securities in its basket. Average maturity and adjusted duration come in at 0.13 and 0.12 years, respectively.
SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28 billion and an average daily volume of 6.5 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 665 bonds in its basket with an average duration of 0.76 years.
JPMorgan Ultra-Short Income ETF has AUM of $23.6 billion in its asset base while trading in a good volume of around 4 million shares a day. It charges 18 bps in annual fees (read: 5 Most Popular Actively Managed ETFs).
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 14 securities in its basket, with an average maturity of 0.28 years and an effective duration of 0.27 years.
iShares Short Treasury Bond ETF has amassed $20 billion in its asset base while trading in a solid volume of 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 $11.5 billion and trades in an average daily volume of 2 million shares. SGOV charges 7 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 675 securities in its basket, with an average maturity of 0.27 years and an effective duration of 0.23 years (read: Recession Odds Rising? ETF Strategies to Navigate the Waters).
PIMCO Enhanced Short Maturity Active ETF has accumulated $9.2 billion in its asset base while trading in a solid volume of around 825,000 shares a day. It charges 35 bps in annual fees.
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Appeal for Cash-Like ETFs Returns With Fed Rate Hike Bets
Amid growing anticipation that the Fed will continue to raise interest rates, the appeal for cash-like ETFs returned. This is especially true as iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) pulled in $572 million last week, marking the biggest weekly increase since the banking turmoil in March.
While there are almost two dozen ETFs in this space, investing in the 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 ultra short-term bonds and help investors to keep aside money for a couple of weeks to a few months with almost no risk.
After a pause in rate hikes in the last meeting, the Fed has signaled more interest rate increases this year that could hurt economic growth, and in turn, weigh on the stocks. As inflation remains above the Fed’s target range of 2%, officials indicated there could be two more quarter-percentage-point increases this year.
The latest job data has heightened fears that the central bank may have reason to resume hiking later this month. According to CME Group’s FedWatch tool, traders kept their bets on a resumption in hiking later this month, pricing in a 92% chance of a quarter-point hike on Jul 26 (read: 5 ETF Zones Primed for 2023 Growth Amid Rate Hike Prospects).
Further, economic activity has continued to expand at a modest pace, and the U.S. banking system is also deemed to be sound and resilient. This also spurred bets of more rate hikes.
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 20 securities in its basket. Average maturity and adjusted duration come in at 0.13 and 0.12 years, respectively.
SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28 billion and an average daily volume of 6.5 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 665 bonds in its basket with an average duration of 0.76 years.
JPMorgan Ultra-Short Income ETF has AUM of $23.6 billion in its asset base while trading in a good volume of around 4 million shares a day. It charges 18 bps in annual fees (read: 5 Most Popular Actively Managed ETFs).
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 14 securities in its basket, with an average maturity of 0.28 years and an effective duration of 0.27 years.
iShares Short Treasury Bond ETF has amassed $20 billion in its asset base while trading in a solid volume of 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 $11.5 billion and trades in an average daily volume of 2 million shares. SGOV charges 7 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 675 securities in its basket, with an average maturity of 0.27 years and an effective duration of 0.23 years (read: Recession Odds Rising? ETF Strategies to Navigate the Waters).
PIMCO Enhanced Short Maturity Active ETF has accumulated $9.2 billion in its asset base while trading in a solid volume of around 825,000 shares a day. It charges 35 bps in annual fees.