Single Bond ETF Tops $1B in Assets for First Time

A week ago, I wrote about how the Direxion Daily TSLA Bull 1.5X Shares (TSLL) had eclipsed $1 billion in assets under management, becoming the first U.S.-listed single-stock ETF to reach that milestone. 

Two days later, as I was putting together a piece on this year’s fastest-growing ETFs, I noticed that another ETF that invests in single securities had also quietly reached the $1 billion threshold.  

The US Treasury 3 Month Bill ETF (TBIL) crossed $1 billion in assets under management on June 5, less than 10 months after launching. In fact, it reached that level one month before TSLL (they both launched in August of last year, coincidentally). 

But launch date aside, TSLL and TBIL couldn’t be more different.  

TSLL holds a single stock (Tesla), while TBIL holds a single bond (the current U.S. three-month Treasury bill). 
 
TSLL is leveraged, while TBIL is not. 

TSLL offers no yield, while TBIL provides monthly dividend payments. 

Single Bond Portfolio  

TSLL’s success is a result of it being a leveraged play on a story stock with a cultlike following. It allows traders to make an aggressive bet on Tesla stock that offers a similar, but slightly different risk/return profile than buying the stock on margin.  

For instance, potential losses on traditional short positions are theoretically uncapped, while potential losses on TSLL are limited to 100% of the invested amount. TSLL also allows traders to add leverage to their Tesla bets outside of a margin account, like in an IRA. 

TSLL’s appeal is a direct result of the leverage that it provides on a single stock. That’s not the case with TBIL, which offers no leverage. 

Rather, the ETF solely invests in the most recently auctioned three-month T-bill, also known as the “on the run” three-month T-bill.  

This single-security portfolio contrasts with most other Treasury ETFs, which hold a basket of different Treasury securities with varying maturities. For instance, the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) holds Treasuries with maturities ranging from one to three months.  

Fine-tuned Exposure  

For most investors, a single-bond ETF like TBIL doesn’t offer any benefits beyond what you get with other bond ETFs. But for investors with sophisticated strategies, the more fine-tuned exposure that it provides might be useful.  

In addition to TBIL, issuer F/m Investments offers single-bond ETFs tied to Treasuries of other maturities, such as the two-year note, the five-year note, the 10-year note and the 30-year bond.  

Some of these, like the US Treasury 2 Year Note ETF (UTWO) and the US Treasury 6 Month Bill ETF (XBIL), have gathered hundreds of millions of dollars in assets, and are on their way to potentially becoming the next billion-dollar single-bond ETFs.  

Single Bond ETFs 

I should mention that these single-bond ETFs aren’t necessarily only for those with sophisticated investment strategies.  

Just as a simple buy-and-hold investment, a fund like TBIL stacks up well against a competitor like the $28 billion SPDR Bloomberg 1-3 Month T-Bill ETF (BIL). 

Their expense ratios are similar—0.15% for TBIL versus 0.14% for BIL; they both pay out dividends monthly; and they have both returned 4% since last August (actually, TBIL is slightly ahead, with a 4.06% return versus 3.9% for BIL). 

Likewise, the US Treasury 10 Year Note ETF (UTEN) matches up well with the iShares 7-10 Year Treasury Bond ETF (IEF). Both have expense ratios of 0.15% and distribute income monthly. 

UTEN is down more since its inception last August—6.4% versus 5.5%—but that’s simply because an ETF that holds a single 10-year bond is more interest rate sensitive than one that holds bonds of various maturities between seven and 10 years (and rates have risen in that time frame).