A new series of exchange-traded funds launched on Tuesday will make it easier for individual and institutional investors to trade the most current individual benchmark U.S. Treasuries, highlighting the maturing of ETFs in the fixed income space.
Treasuries are among the world’s most liquid securities but can be cumbersome to trade, especially for investors who must roll them over frequently to maintain the maturity.
The US Benchmark Series, a collaboration between F/m’s North Slope Capital LLC and Genoa Asset Management LLC, aims to change that, with 10-year (UTEN.O) and two-year (UTWO.O) Treasury ETFs, as well as three-month bill ETF (TBIL.O) that will hold each maturity’s most current Treasuries.
“This gives (investors) a tool to say, we really want to focus on how we execute our investment strategy, as opposed to how effectively we trade Treasury bonds,” said F/m President Alex Morris.
The new ETFs, which will eventually include more maturities, as well as options, will make it easier for people managing bond portfolios in a precise way, said Dave Nadig, director of research at ETF Flows.
“I put this in the category of sharp tools in the drawer,” he said. “For most investors, I don’t think it’s relevant. For investors that need this product, it’s a godsend.”
Demand for fixed income ETFs has risen as the economy has soured, including among retail investors, who piled into credit ETFs such as SPDR Bloomberg High Yield Bond ETF , the iShares iBoxx $ Inv Grade Corporate Bond ETF and the iShares iBoxx $ High Yield Corporate Bond ETF late last month, said JP Morgan strategist Peng Cheng.
Growth in bond ETFs has also come as regulatory barriers that hindered institutional ownership have dropped, putting the asset class in an ETF “sweet spot,” said Nadig.
“Fixed income is probably going to be the growth story of the ETF space for the next four or five years,” he said.