SSGA launches ultra-short-term US T-Bill ETF in Europe

Jul 18th, 2019 | By | Category: Fixed Income

State Street Global Advisors (SSGA) has launched a new fixed income ETF in Europe providing exposure to ultra-short-term debt securities issued by the US government.

Antoine Lesné, Head of EMEA Strategy & Research for SPDR ETF.

Antoine Lesné, Head of EMEA Strategy & Research for SPDR ETF.

The SPDR Bloomberg Barclays 1-3 Month T-Bill UCITS ETF (ZPR1 GY) trades in US dollars on Xetra and comes with an expense ratio of 0.10%.

The fund, which mirrors the strategy of a $9.2 billion ETF offered by SSGA in the US, targets the Treasury bill (or T-Bill) market by tracking the Bloomberg Barclays US Treasury Bills 1-3 Month Index.

The fund is the first physical UCITS ETF to offer dedicated exposure to short-term Treasury bills.

Treasury bills are debt obligations of the US government that are issued with no more than one year until expiry. They do not pay any coupons and are thus typically issued at a discount to their par value.

The index focuses exclusively on Treasury bills, excluding inflation-protected securities as well as other zero-coupon bonds such as strip bonds. Eligible bills must have a remaining time to maturity between one and three months.

Due to its focus on ultra-short-term securities, the index has an effective duration of just 0.07 years.

Treasury bills are very much considered a safe-haven asset and thus the fund may appeal to investors who are concerned about slowing economic growth and uncertainty surrounding ongoing US-China trade negotiations.

Short-term yields are also higher than longer-dated US Treasury bonds due to an inversion of the US yield curve. The index is currently running at a yield-to-maturity of 2.08%.

Antoine Lesné, Head of EMEA Strategy & Research for SPDR ETF, commented, “The ETF can be used a strategic portfolio building block, providing exposure to short-dated US T-Bills. Alternatively, it can be used to make tactical characteristic adjustments to an investor’s overall portfolio which could include reducing the overall duration of a bond portfolio or increasing its credit quality. In addition, the fund can help with cash and liquidity management.”

SSGA has also introduced a share class of the fund that trades in Mexican pesos while hedging its exposure to the US dollar. The SPDR Bloomberg Barclays 1-3 Month T-Bill MXN Hdg UCITS ETF (ZPRM GY) matches the expense ratio of 0.10%.

The US version of the fund, the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL US), debuted on NYSE Arca in 2007 but has actually gathered the majority of its assets in the past 18 months, including over $6bn in the past 12 months.

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