State Street’s (STT) State Street Global Advisors unit, the second-largest U.S. ETF issuer, will introduce the SPDR SSgA Ultra Short Term Bond ETF (NYSEArca:ULST) today. Although U.S. Treasury yields have retreated a bit since the Federal Reserve said it will not taper its quantitative easing program, investors are still evaluating short duration bond funds as conservative, income-generating tools.
“Under normal circumstances, the Fund invests substantially all of its assets in the SSgA Ultra Short Term Bond Portfolio (the “Portfolio”), a separate series of the SSgA Master Trust with an identical investment objective as the Fund. As a result, the Fund invests indirectly through the Portfolio,” according to SSGA’s SEC filing for ULST.
The Portfolio primarily invests in investment grade fixed income securities that are rated a minimum of A- or higher by Standard & Poor’s Financial Services and/or Fitch or A3 or higher by Moody’s Investors Service, or, if unrated, determined by the management team to be of equivalent quality. The Portfolio invests in fixed and floating rate securities of varying maturities, such as corporate obligations (including commercial paper of U.S. and foreign entities, master notes, and medium term notes); government bonds (including U.S. Treasury Bills, notes, and bonds); agency securities; privately-issued securities; asset-backed and mortgage-backed securities; money market instruments (including U.S. and foreign bank time deposits, certificates of deposit, and banker acceptances) and other investment companies. The Portfolio may also invest in exchange traded products,” according to the filing.
ULST’s debut comes just a few weeks after iShares unveiled the iShares Short Maturity Bond ETF(NEAR) . The actively managed NEAR has an effective duration of 0.94 years.
NEAR invests in a diversified portfolio of short maturity fixed income securities such as government bonds, corporate bonds, asset-backed securities, and mortgage-backed securities. It may also invest in commercial mortgage-backed securities, according to iShares. [iShares: What to do When a Rising Rate Environment is NEAR]
ULST is also actively managed. The SEC filing indicates SSgA has filed plans for two short-term bond ETFs, one with an aggressive approach and the other with a more conservative tilt.
ETF Trends editorial team contributed to this post.
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