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Wall Street has been struggling to find a footing at the start of 2024 due to overvaluation concerns and uncertainty about the timing of Fed rate cuts. Additionally, the lackluster start to the earnings season that kicked off with big bank results has added to the woes.
The uncertainty has made investors jittery, raising demand for cash-like ETFs. While there are almost two dozen ETFs in this space, a few are scaling new highs. These include BlackRock Ultra Short-Term Bond ETF (ICSH - Free Report) , T. Rowe Price Ultra Short-Term Bond ETF (TBUX - Free Report) , SPDR SSGA Ultra Short Term Bond ETF (ULST - Free Report) , Goldman Sachs Access Ultra Short Bond ETF (GSST - Free Report) and BNY Mellon Ultra Short Income ETF (BKUI - Free Report) .
These funds invest in short-term bonds and look lucrative. In fact, these will help investors keep aside money for a couple of weeks to a few months with almost no risk.
Current Market Trends
The latest Fed minutes showed that the central bank wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control (read: 4 ETF Zones Beating the Market to Start 2024).
The latest data on inflation, which came in modestly hotter than expected, has dampened market expectations about an interest rate hike as soon as March. Though the job data report for December came in stronger than expected, it also cast doubt on the expectations of March rate cuts. The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction in December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
Markets are pricing in a 71.4% chance of a 25 bps rate cut in March, compared with an 81% probability in the prior session, according to CME's FedWatch Tool.
While the timing of interest rate cuts is uncertain, the Fed penciled in three rate cuts for this year in its last meeting. This shift in its monetary policy approach is a result of gradual control of inflation and aims to support a stable economic environment without triggering a recession or a significant rise in unemployment. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth (read: 5 Top-Ranked Mid-Cap ETFs to Buy Now).
In such a scenario, investors want to keep money aside and the above-mentioned ETFs have gained on this expectation. We have highlighted them in detail:
BlackRock Ultra Short-Term Bond ETF is actively managed and seeks to provide income by investing in a broad range of short-term U.S. dollar-denominated investment-grade fixed- and floating-rate debt securities and money market instruments. It holds 222 securities in its basket and charges 8 bps in annual fees. Average maturity and effective duration came in at 0.59 years and 0.45 years, respectively.
BlackRock Ultra Short-Term Bond ETF has amassed $6 billion in its asset base while trading in a volume of 1.2 million shares per day on average.
T. Rowe Price Ultra Short-Term Bond ETF (TBUX - Free Report)
T. Rowe Price Ultra Short-Term Bond ETF invests in a diversified portfolio of shorter-term investment-grade corporate and government securities, asset-backed securities, and bank obligations. It holds 372 stocks in its basket with a weighted duration of 0.61 years. Effective maturity is 1.25 years.
T. Rowe Price Ultra Short-Term Bond ETF has been able to manage $113.3 million in its asset base and charges 17 bps in annual fees. It trades in a volume of 7,000 shares per day on average.
SPDR SSGA Ultra Short Term Bond ETF is an actively managed ETF that invests in slightly longer-term securities than traditional cash vehicles with the goal of generating a better total return. It holds 172 bonds in its basket with an average maturity of 0.88 years and an adjusted duration of 0.79 years.
SPDR SSGA Ultra Short Term Bond ETF has AUM of $600.7 million and charges 20 bps in fees per year. It trades in an average daily volume of 181,000 shares.
Goldman Sachs Access Ultra Short Bond ETF (GSST - Free Report)
Goldman Sachs Access Ultra Short Bond ETF seeks to provide exposure to a broad universe of ultra-short duration, high-quality fixed-income securities. It holds 345 stocks in its basket with an effective duration of 0.62 years. GSST has key holdings in investment-grade corporate securities, mortgage-backed securities and asset-backed securities.
Goldman Sachs Access Ultra Short Bond ETF has amassed $626.4 million and trades in a volume of 120,000 shares per day on average. It charges 16 bps in annual fees (read: 5 Top-Ranked ETFs to Buy Cheap in 2024).
BNY Mellon Ultra Short Income ETF seeks high current income consistent with the maintenance of liquidity and low volatility of principal. It provides exposure to investment grade, US-dollar denominated short-term fixed income and floating rate instruments. Holding 114 stocks in its basket, it has effective duration of 0.75 years and average maturity of 1.08 years.
BNY Mellon Ultra Short Income ETF has AUM of $66.9 million and trades in a volume of 7,000 shares per day on average. It charges 12 bps in annual fees.
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Cash-Like ETFs Spike Amid Market Turmoil
Wall Street has been struggling to find a footing at the start of 2024 due to overvaluation concerns and uncertainty about the timing of Fed rate cuts. Additionally, the lackluster start to the earnings season that kicked off with big bank results has added to the woes.
The uncertainty has made investors jittery, raising demand for cash-like ETFs. While there are almost two dozen ETFs in this space, a few are scaling new highs. These include BlackRock Ultra Short-Term Bond ETF (ICSH - Free Report) , T. Rowe Price Ultra Short-Term Bond ETF (TBUX - Free Report) , SPDR SSGA Ultra Short Term Bond ETF (ULST - Free Report) , Goldman Sachs Access Ultra Short Bond ETF (GSST - Free Report) and BNY Mellon Ultra Short Income ETF (BKUI - Free Report) .
These funds invest in short-term bonds and look lucrative. In fact, these will help investors keep aside money for a couple of weeks to a few months with almost no risk.
Current Market Trends
The latest Fed minutes showed that the central bank wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control (read: 4 ETF Zones Beating the Market to Start 2024).
The latest data on inflation, which came in modestly hotter than expected, has dampened market expectations about an interest rate hike as soon as March. Though the job data report for December came in stronger than expected, it also cast doubt on the expectations of March rate cuts. The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction in December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
Markets are pricing in a 71.4% chance of a 25 bps rate cut in March, compared with an 81% probability in the prior session, according to CME's FedWatch Tool.
While the timing of interest rate cuts is uncertain, the Fed penciled in three rate cuts for this year in its last meeting. This shift in its monetary policy approach is a result of gradual control of inflation and aims to support a stable economic environment without triggering a recession or a significant rise in unemployment. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth (read: 5 Top-Ranked Mid-Cap ETFs to Buy Now).
In such a scenario, investors want to keep money aside and the above-mentioned ETFs have gained on this expectation. We have highlighted them in detail:
BlackRock Ultra Short-Term Bond ETF (ICSH - Free Report)
BlackRock Ultra Short-Term Bond ETF is actively managed and seeks to provide income by investing in a broad range of short-term U.S. dollar-denominated investment-grade fixed- and floating-rate debt securities and money market instruments. It holds 222 securities in its basket and charges 8 bps in annual fees. Average maturity and effective duration came in at 0.59 years and 0.45 years, respectively.
BlackRock Ultra Short-Term Bond ETF has amassed $6 billion in its asset base while trading in a volume of 1.2 million shares per day on average.
T. Rowe Price Ultra Short-Term Bond ETF (TBUX - Free Report)
T. Rowe Price Ultra Short-Term Bond ETF invests in a diversified portfolio of shorter-term investment-grade corporate and government securities, asset-backed securities, and bank obligations. It holds 372 stocks in its basket with a weighted duration of 0.61 years. Effective maturity is 1.25 years.
T. Rowe Price Ultra Short-Term Bond ETF has been able to manage $113.3 million in its asset base and charges 17 bps in annual fees. It trades in a volume of 7,000 shares per day on average.
SPDR SSGA Ultra Short Term Bond ETF (ULST - Free Report)
SPDR SSGA Ultra Short Term Bond ETF is an actively managed ETF that invests in slightly longer-term securities than traditional cash vehicles with the goal of generating a better total return. It holds 172 bonds in its basket with an average maturity of 0.88 years and an adjusted duration of 0.79 years.
SPDR SSGA Ultra Short Term Bond ETF has AUM of $600.7 million and charges 20 bps in fees per year. It trades in an average daily volume of 181,000 shares.
Goldman Sachs Access Ultra Short Bond ETF (GSST - Free Report)
Goldman Sachs Access Ultra Short Bond ETF seeks to provide exposure to a broad universe of ultra-short duration, high-quality fixed-income securities. It holds 345 stocks in its basket with an effective duration of 0.62 years. GSST has key holdings in investment-grade corporate securities, mortgage-backed securities and asset-backed securities.
Goldman Sachs Access Ultra Short Bond ETF has amassed $626.4 million and trades in a volume of 120,000 shares per day on average. It charges 16 bps in annual fees (read: 5 Top-Ranked ETFs to Buy Cheap in 2024).
BNY Mellon Ultra Short Income ETF (BKUI - Free Report)
BNY Mellon Ultra Short Income ETF seeks high current income consistent with the maintenance of liquidity and low volatility of principal. It provides exposure to investment grade, US-dollar denominated short-term fixed income and floating rate instruments. Holding 114 stocks in its basket, it has effective duration of 0.75 years and average maturity of 1.08 years.
BNY Mellon Ultra Short Income ETF has AUM of $66.9 million and trades in a volume of 7,000 shares per day on average. It charges 12 bps in annual fees.