BlackRock expands Treasury bond suite with ultra-short ETF

Jun 1st, 2020 | By | Category: Fixed Income

BlackRock has expanded its suite of US Treasury bond ETFs with a new fund providing ultra-short duration exposure.

Stephen Laipply, Head of US iShares Fixed Income Strategy at BlackRock.

Steve Laipply, US Head of iShares Fixed Income ETFs for BlackRock.

The iShares 0-3 Month Treasury Bond ETF (SGOV US) has listed on NYSE Arca and comes with an expense ratio of 0.07%.

The fund is linked to the ICE 0-3 Month US Treasury Securities Index which consists of fixed-rate US Treasury bills, notes, and bonds with maturities of three months or less.

Inflation-linked and floating rate debt, as well as STRIPS (Separate Trading of Registered Interest and Principal of Securities), are not eligible for inclusion.

The fund becomes the lowest-cost fund in its category of ultra-short Treasury bond ETFs – those consisting of securities with less than one year to maturity.

The largest funds in the category are the $24.4bn iShares Short Treasury Bond ETF (SHV US), which comes with an expense ratio of 0.15%; the $18.5bn SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL US), which has an expense ratio of 0.13%; and the $3.5bn Goldman Sachs Access Treasury 0-1 Year ETF (GBIL US), which costs 0.14%.

The ETF may appeal to investors seeking low-cost, liquid exposure to Treasuries in order to protect their portfolios from potential future volatility.

Steve Laipply, US Head of iShares Fixed Income ETFs for BlackRock, commented, “iShares is committed to providing investors with the tools they need to build resilient bond portfolios, the importance of which has been reinforced as investors sought safe havens in recent volatile markets.

“We’ve seen more than $26 billion in flows across the suite of iShares short-term bond ETFs year-to-date. The addition of SGOV to our US Treasury and shorter maturity suites offers precise exposure for increased stability, liquidity, and cash management.”

The launch brings the number of iShares Treasury bond ETFs to 20, collectively representing $140bn in assets under management. The suite also includes funds providing access to other yield curve segments as well as broad yield curve, inflation-protected, floating rate, and target-date ETFs.

According to BlackRock, bond ETFs played an indispensable role in markets during the unprecedented volatility, dislocation, and challenges in liquidity caused by the Covid-19 sell-off.

In the first quarter of 2020, bond ETFs registered trading volumes of $1.3 trillion globally, half the trading volume recorded for the whole of 2019. During this time, BlackRock notes that bond ETFs provided price discovery, helped investors understand rapidly changing market conditions, and provided a benchmark reference for returns, volatility, and sentiment.

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