Global X Debuts Ultra-Short Bond ETF

Global X Debuts Ultra-Short Bond ETF

The fund launches at an ideal time for short-duration Treasuries.

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Reviewed by: Lisa Barr
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Edited by: Daria Solovieva

Global X ETFs, known as a purveyor of thematic stock exchange-traded funds, leaped into a new market on Wednesday when it launched the Global X 1-3 Month T-Bill ETF (CLIP)

The fund is an ultra-short-duration Treasury ETF that, like the name implies, holds Treasury bills with a maturity of one to three months. The fund opened at a fortuitous time, as one- to three-month Treasury bills all have yields over 5%. For most of the previous decade and change, T-bills had interest rates of roughly zero.  

Another factor making short-term Treasuries attractive is that the yield curve is more inverted than it has been in a long time. This means short-term Treasuries have higher yield than longer-term ones, the opposite of what is usually the case.  

“If you wanted to get yields for most of the last decade, you had to stretch for duration or credit risk, but now you can collect 5% for even ultra-short duration Treasuries,” said Rohan Reddy, director of research at Global X. 

'Almost Cashlike Investment'

He described the fund as a low-risk, “almost cashlike investment,” something there’s been a lot of appetite for this year as money market funds have seen hundreds of billions in inflows as the regional banking crisis spooked markets.  

However, short-term bond funds have seen only a fraction of those inflows, despite similar risk and sometimes lower expense ratios than money market funds.  

“I think it’s a lot about comfortability, with existing money market funds being something people have been invested in for a long time,” Reddy noted. 

Global X aims to differentiate itself from existing funds in the ultra-short Treasury space by offering a lower-cost product.  

CLIP has an expense ratio of 0.07%, which is significantly lower than the three largest ultra-short Treasury ETFs: the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), the JPMorgan Ultra-Short Income ETF (JPST) and the iShares Short Treasury Bond ETF (SHV). All three have expense ratios that are double or more than CLIP’s.  

Still, it is not the cheapest in the category, as the iShares 0-3 Month Treasury Bond ETF (SGOV) has an expense ratio of 0.05%. 

“For super-short duration bond ETFs, every basis point can matter,” said Reddy.  

As to what comes next for Global X, Reddy said, “We launch products very selectively in the income space, as it’s more saturated than some other markets. I don’t think we’ll go and launch a massive suite of fixed income products.” 

 

Contact Gabe Alpert at [email protected]          

Gabe Alpert is a former data reporter at etf.com with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.