Single-bond ETFs

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Xan
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Single-bond ETFs

Post by Xan » Wed Oct 26, 2022 8:34 am

Single-bond ETFs may be the key to revolutionize trading Treasurys

This does seem like a very convenient way to get exposure to (for example) 3-month T-Bills, via the ETF TBIL.

However when I click on the ticker link from that article it looks like the fund is way more volatile than I would have expected, with much less of a dividend. Not sure what to make of it.
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Re: Single-bond ETFs

Post by whatchamacallit » Wed Oct 26, 2022 2:40 pm

I probably saw this same article come up about these and then found the .15 % expense ratio and lost interest in them from there.

I am going to try the non-competitive auction through Fidelity with auto roll here soon to see how I like that.

I have only previously been buying secondary and felt like I was losing a bit with the bid/ask spread. I am assuming there won't be anything lost on a bid/ask spread when buying through auction.


I am starting to think that the point of existence for these bond funds is for certain retirement accounts that can't get direct access to bonds.
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Xan
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Re: Single-bond ETFs

Post by Xan » Wed Oct 26, 2022 4:00 pm

whatchamacallit wrote:
Wed Oct 26, 2022 2:40 pm
I probably saw this same article come up about these and then found the .15 % expense ratio and lost interest in them from there.

I am going to try the non-competitive auction through Fidelity with auto roll here soon to see how I like that.

I have only previously been buying secondary and felt like I was losing a bit with the bid/ask spread. I am assuming there won't be anything lost on a bid/ask spread when buying through auction.


I am starting to think that the point of existence for these bond funds is for certain retirement accounts that can't get direct access to bonds.

If you're currently doing a "high yield" savings account paying, say, 2.35%, then you might well be interested in 4+% T-bills even if there's a small expense ratio, and a fund retains much of the convenience of the savings account.
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Re: Single-bond ETFs

Post by whatchamacallit » Wed Oct 26, 2022 5:45 pm

Yes I agree T bills are much better return than any savings account or CD right now. It is hard to believe and I don't quite understand why. I guess banks just don't have the need for further deposits so they don't try to compete.

I currently have a mix of SGOV ETF and direct t bills through Fidelity.

I do like how easy it is to buy the ETF but it is harder to understand what yield you are getting in the fund. You have spreads with the ETF and then I would assume you also have spreads when the fund buys and sells the bills inside the fund.

So I am curious how the non-competitive auction goes. I assume there won't be bid/ask spreads.
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Re: Single-bond ETFs

Post by coasting » Wed Oct 26, 2022 8:42 pm

whatchamacallit wrote:
Wed Oct 26, 2022 5:45 pm
Yes I agree T bills are much better return than any savings account or CD right now. It is hard to believe and I don't quite understand why. I guess banks just don't have the need for further deposits so they don't try to compete.

I currently have a mix of SGOV ETF and direct t bills through Fidelity.

I do like how easy it is to buy the ETF but it is harder to understand what yield you are getting in the fund. You have spreads with the ETF and then I would assume you also have spreads when the fund buys and sells the bills inside the fund.

So I am curious how the non-competitive auction goes. I assume there won't be bid/ask spreads.
Correct. If you are buying Treasurys at auction there is no bid/ask spread - everyone gets the same price: dealers, institutions, retail investors, etc. For details on Single-price auction (modified Dutch auction), see https://en.wikipedia.org/wiki/Single-price_auction

The question is does your broker charge a commission? I don't have a Fidelity account, but there is no fee for Online orders per the Brokerage Commission and Fee schedule at
https://www.fidelity.com/bin-public/060 ... hedule.pdf
U.S. Treasury, including TIPS — Auction Purchases
Online No charge
Rep-Assisted $19.95 per trade

I expect no brokerage fee to buy US Treasurys at auction is common practice these days.

I have purchased T-Bills at auction through eTrade and confirm there is no commission charged there. I think if you do buy/sell US Treasurys through secondary market, bid/ask spreads should generally be ok as the market is very liquid. But buying at auction is the one way to be absolutely sure you are not taken advantage of. And if there is no commission, a broker beats using TreasuryDirect because if something comes up and you do have to sell before maturity, you don't have to go through the hassle to get them transferred to a brokerage first before you can dispose of in secondary market.

One thing I'll note for placing T-Bill auction order at eTrade: sweep account must have enough $ to cover the face value. So for example, tomorrow 10/27 the offering period starts for the 52-week bill scheduled to auction on Tuesday 11/01. To place order to purchase quantity 10, the sweep account must have the full $10K even though I expect the total purchase price will be ~$450 less than that.
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Re: Single-bond ETFs

Post by whatchamacallit » Wed Oct 26, 2022 9:02 pm

Thanks for confirmation about the bid/ask spreads Coasting.

That is good information on needing to have the full $1000 in account for each bond/bill purchased.
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Re: Single-bond ETFs

Post by jalanlong » Tue Nov 08, 2022 12:09 pm

whatchamacallit wrote:
Wed Oct 26, 2022 2:40 pm
I probably saw this same article come up about these and then found the .15 % expense ratio and lost interest in them from there.

I am going to try the non-competitive auction through Fidelity with auto roll here soon to see how I like that.

I have only previously been buying secondary and felt like I was losing a bit with the bid/ask spread. I am assuming there won't be anything lost on a bid/ask spread when buying through auction.


I am starting to think that the point of existence for these bond funds is for certain retirement accounts that can't get direct access to bonds.
There are Treasury Bill ETFs with much lower expense ratios than .15%. For example CLTL has .08% and SGOV has .05%. I think it is possible that those expenses might be made up for in the ability to reinvest the interest into the ETF instead of having your Tbills deposit your interest elsewhere and then have a few days downtime until they roll into another bill. The differences might end up being negligible.
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Re: Single-bond ETFs

Post by whatchamacallit » Wed Nov 09, 2022 9:53 am

I completed a 3 month auction just in time to watch the rates go up right after. I also set up auto roll on it.

For simplicity sake I am liking both sgov and cltl as mindless place to put cash while waiting for I bond space.

Sgov is winning out for now but their expense ratio is scheduled to go up to .12 next June.

Cltl is intriguing. I have tried to find other funds using the same ICE short term Treasury index and can't. It seems like there might be some funds outside the usa that use it but nothing else like it in the country.

Cltl does seem like the current long term sweet spot if moving further out past money market fund for cash.

Cltl AUM is good bit lower than sgov but it's premium and bid ask spread looks to be just as tight.

Something odd about sgov is the average yield to maturity seems to be listed too low on their website. 2.84 listed while I would expect 3.84

Sorry for short type from my phone in a hurry.
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Re: Single-bond ETFs

Post by Kbg » Wed Nov 09, 2022 4:51 pm

Thanks for the heads up on CLTL. Was not aware of it.
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Re: Single-bond ETFs

Post by jalanlong » Wed Jan 11, 2023 12:00 pm

Xan wrote:
Wed Oct 26, 2022 8:34 am
Single-bond ETFs may be the key to revolutionize trading Treasurys

This does seem like a very convenient way to get exposure to (for example) 3-month T-Bills, via the ETF TBIL.

However when I click on the ticker link from that article it looks like the fund is way more volatile than I would have expected, with much less of a dividend. Not sure what to make of it.
I have read the website and several articles on these single bond ETFs. I do not get the advantage of owning an ETF that trades into the current 3 month Treasury each month as opposed to just a generic Treasury ETF like SGOV or XHLF that holds a variety of 3-6 month treasuries at much lower expense ratios.

I did hear they are going to launch an on the run 30 year Treasury ETF soon. That could be helpful for PP users.
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