This article was originally published on ETFTrends.com.
Many investors have funneled the most cash since October 2013 to global money markets in response to the spike in uncertainty surrounding trade tensions and weakness in emerging markets. Investors can also look to ultra short duration bond ETFs to park their cash and garner a small yield as well.
In the week ended June 6, $55 billion flowed into global money markets, with $45 billion going into U.S. funds, Bloomberg reports.
“With the global growth story losing some of its shine, tariff-related rhetoric increasing in volume and a populist government taking office in Italy, investors opted for liquidity in early June,” Cameron Brandt, director of research, wrote in a note, adding that European equity and emerging-market fixed income were among the biggest losers.
Additionally, concerns over developing economies and trade problems are still ongoing this week as Friday's G-7 meeting in Quebec highlighted President Donald Trump's hard line stance on the international stage, which further added to the global risk outlook.
Cash Alternatives Producing Yields
Nevertheless, some shifted into cash alternatives that are also producing real returns for the first time since the crisis. Three-month Treasury bills yield around 1.9%, or up 1.4 percentage points since the start of 2018.
Investors who are seeking money fund substitutes may look to actively managed, ultra-short duration bond ETFs that are more free to adapt holdings in a shifting market environment.
For example, the PIMCO Enhanced Short Maturity ETF (MINT) has a 2.41% 30-day SEC yield and a 0.52 year duration. The Invesco Enhanced Short Duration Bond (GSY) has a 2.25% 30-day SEC yield and a 0.1 year duration. The SPDR SSgA Ultra Short Term Bond ETF (ULST) has a 2.11% 30-day SEC yield and a 0.23 year duration. The iShares Short Maturity Bond ETF(NEAR) has a 2.35% 30-day SEC yield and a 0.49 year duration.
Potential investors should be aware that these active ultra-short-term bond ETFs include corporate debt exposure with some lower quality investment-grade debt exposure, which may have contributed to their relatively higher yields.
Additionally, investors can look at conservative short-duration Treasury bond ETFs, such as the iShares Short Treasury Bond ETF (SHV) , which has an effective duration of 0.42 years and 1.81% 30-day SEC yield, and the SPDR Barclays 1-3 Month T-Bill (BIL) , which has a 0.15 year duration and a 1.60% 30-day SEC yield.
For more information on the fixed-income markets, visit our bond ETFs category.
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