TBIL: Short Term Fund Outperforming Peers

seekingalpha06-18

The US Treasury 3 Month Bill ETF is a fixed income exchange-traded fund.TBIL fund composition includes only AAA rated T-Bills with 30-day SEC yield of 5.11%.TBIL has slightly edged out similar funds (...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTBIL: Short Term Fund Outperforming Peers\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-18 04:25 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4699695-tbil-etf-short-term-fund-outperforming-peers><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The US Treasury 3 Month Bill ETF is a fixed income exchange-traded fund.TBIL fund composition includes only AAA rated T-Bills with 30-day SEC yield of 5.11%.TBIL has slightly edged out similar funds (...</p>\n\n<a href=\"https://seekingalpha.com/article/4699695-tbil-etf-short-term-fund-outperforming-peers\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TBIL","symbol_name":"US Treasury 3 Month Bill ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4699695-tbil-etf-short-term-fund-outperforming-peers","article_id":"2444112099","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/998227024/image_998227024.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2444112099","pubTimestamp":1718655957,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The US Treasury 3 Month Bill ETF is a fixed income exchange-traded fund.TBIL fund composition includes only AAA rated T-Bills with 30-day SEC yield of 5.11%.TBIL has slightly edged out similar funds (","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":["rate"],"viewcount":null,"language":"en","relate_stocks":{"TBIL":"US Treasury 3 Month Bill ETF"},"translate_title":"TBIL：短期基金表现优于同行","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TBIL":1},"content_text":"The US Treasury 3 Month Bill ETF is a fixed income exchange-traded fund.TBIL fund composition includes only AAA rated T-Bills with 30-day SEC yield of 5.11%.TBIL has slightly edged out similar funds (SGOV, BIL) since the Federal Reserve raised interest rates.Strong returns are expected as long as Fed rates stay high, with most investment banks predicting only one cut for 2024.   SARINYAPINNGAM/iStock via Getty Images Thesis The US Treasury 3 Month Bill ETF (NASDAQ:TBIL) is a short term treasury fund. A lot of ink has been spilled around investors needing to allocate more risk in their portfolios, but yet we are seeing record low credit spreads and overstretched equity markets. A retail investor needs to keep in mind that the name of the game is to make money, not buy overvalued assets. When both equities and credit look overbought, staying in cash is not only smart, but also in agreement with what many other market participants are doing:   Money Market Fund AUM (BofA) The AUM of money market funds has been steadily increasing, with many market participants happy with the 5% plus returns provided. In this article we are going to review TBIL and its composition, go over the risk and rewards presented by the fund, and articulate why we believe having a higher allocation to this fund in today's environment is not a bad idea. Fund composition As per its literature, the fund aims to capture the returns of 3-month T-Bills: The investment objective of the US Treasury 3 Month Bill ETF (the \"UST 3 Month Bill Fund\") is to seek investment results that correspond (before fees and expenses) generally to the price and yield performance of the ICE BofA US 3- Month Treasury Bill Index (G0O1). Short term T-Bills have a negligible duration and capture the yield profile of the front end of the treasury curve. The fund contains only AAA rated T-Bills, and comes with a 30-day SEC yield of 5.11%. We still consider U.S. debt AAA, although technically only two rating agencies still have the highest rating assigned:   Country Ratings (Bloomberg) Only Moody's and DBRS still have the AAA rating, while S&P and Fitch have already downgraded U.S. debt by one notch. There is no credit risk in this fund via its composition, and no interest rate risk either given its duration profile. The fund is an efficient way to capture the short end of the curve. Currently the vehicle contains only 3 T-Bills:   Holdings (Fund Website) There is an August T-Bill and two September maturity ones. They are both very liquid issuances, with the majority of the funds held in the August issuance. Performance - narrowly outperforming its cohort Since the start of the Fed hikes, TBIL has narrowly outperformed its peers: Data by YCharts From the above chart we can see how TBIL beats the iShares 0-3 Month Treasury Bond ETF (SGOV) and the SPDR Bloomberg 1-3 Month TBill (BIL) fund. While the outperformance is small, kindly keep in mind these are all short term instruments funds. While not fungible since they address different nodes in the curve, the three funds will provide very similar total returns over longer periods of time. Wide divergence on rate cuts timing As outlined above TBIL captures the front end of the yield curve, and its total return will stay elevated as long as Fed Funds are high. We came into 2024 with the market expecting seven rate cuts by the Fed, cuts which have now narrowed to one or two, as per market pricing. Nobody knows for sure where Fed Funds will end up, not even the Fed. If inflation continues to come down, we will see a token cut this year. Conversely, sticky inflation figures might force the Fed to stay pat the entire year. Investment banks are as dispersed as retail investors on the topic:   Rate Cut Projections (WSJ) While Bank of America sees only one rate cut this year in December, MUFG sees four starting in July. The other large, Tier 1 banks have penciled in one or two cuts. We are looking at Barclays, Goldman and JP Morgan here. Citi is the outlier with 75 bps (three cuts) from the large Tier 1 institutions. In a base case scenario where we get one cut towards the end of the year, short end funds like TBIL will still deliver outstanding results with no risk. One cut of 25 bps does not make much of a difference for the year end total return for the asset class. TBIL will start to look unappealing only when rates go below 4%, which is a level where investors can obtain dividend yields from equities with low standard deviations. Until then it is an asset to own, especially when other instruments look overpriced. Cash is not trash in today's environment, and on the fixed income side it has been a steady yielder, especially when looking at long duration bonds or the fixed income aggregate fund which is barely breaking even for the year. When constructing a portfolio, kindly keep in mind that your total return should be benchmarked as a spread against risk free assets. If you make 7% for the year, but TBIL returned 5.2% for the same period, in effect you took market risk for only a 1.8% spread to TBIL. High portfolio volatility with muted total returns are not desirable, and should be calculated as such, rather than an absolute number. Conclusion  TBIL is an exchange traded fund. The vehicle focuses on treasury bills, and aims to capture the return of 3-months T-Bills respectively. The fund has outperformed its peers since the start of the Fed hiking cycle, and provides a robust total return in today's high risk free rate environment. With no duration or credit risk TBIL will continue to provide outstanding returns until the Fed aggressively cuts rates. With inflation still sticky, major investment banks are only penciling in one or two rate cuts for the rest of the year. TBIL is a 'Buy' for the rest of 2024.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2444112099"}