The Clap
ETF investors are investing billions into ETFs that track short-term and long-term yield curves.
The Deets
Around $13 billion were invested into SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), which tracks the short-term treasury yield. In comparison, another $13 billion were invested into the iShares 20+ Year Treasury Bond ETF (TLT), which tracks long-term treasury yield.
Investors who expect the Fed to ease on interest rate hikes or even cut rates in the future could stand to benefit from investing in the TLT.
On the other hand, investors are also investing in the BIL as a result of the yield coming from short-term treasuries.
Some fund managers split their allocation between both strategies in order to avoid making predictions regarding the Fed’s decision.
Why this Matters
Cash-like ETFs, such as BIL, have recorded virtually flat returns this year. TLT, on the other hand, is gaining popularity as investors may believe that interest rates are close to reaching their peak.
