SGOV: The best way to get exposure to treasury bills?

[simpleisbest]

SGOV holds a constant 0-3 month treasury bill ladder. The expense ratio is 0.12% but only 0.05% for Fidelity accounts. The SEC yield is 5.13% which trumps money market funds. The fund rarely loses any value in a single day, but always makes it up the next day when it does. This appears to allow someone to hold a 3-month treasury bill ladder for the ultra-low cost of 0.05%, with perfect liquidity and divisibility to $100.

After experimenting with the awkwardness of TreasuryDirect and individual treasury bills, this fund seems like the perfect way to hold treasury bills. TreasuryDirect doesn't let you sell unless you transfer to a brokerage after 45 days of purchase. Individual treasury bills appear to have a lock out period where they can't be sold within a week of maturity. Constructing a full 3-month ladder would require purchasing 13 different individual treasury bills, which would take either 4-5 weeks of steady weekly purchases through TreasuryDirect, or a minimum of $13,000 trading individual $1000 bills.

Thus SGOV seems to dominate individual treasury bills and money market funds.

[WhitePuma]

I don't know if it's the "best" it's pretty darn good. I hold this fund as my ultra-short fixed income and have enjoyed the benefits that you laid out in your post.

I'm curious - how/where did you see that the expense ratio is only 0.05% when held in a Fidelity account?

[increment]

The expense ratio is 0.12% but only 0.05% for Fidelity accounts.

That's not how the expenses work. As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

[Lastrun]

I'm curious - how/where did you see that the expense ratio is only 0.05% when held in a Fidelity account?

The expense ratio IS only 0.05% until tomorrow. From the Fidelity website AND the fund documents:

BFA, the investment adviser to the Fund, has contractually agreed to waive a portion of its management fee so that the Fund’s total annual fund operating expenses after the fee waiver will not exceed 0.05% through June 30, 2023. The contractual waiver may be terminated prior to June 30, 2023 only upon written agreement of the Trust and BFA.

So I don't think this something special to Fidelity just a standard fee waiver.

Edit: Crossed with Increment on posts.

[howard71]

I wouldn't pay anybody a fee to manage T-Bills.

It's too easy to buy them and manage yourself on both Fidelity and Vanguard.

Treasury Direct? Sorry, not a big fan. Would never buy them there.

[Eno Deb]

As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

iShares has updated the ER information for SGOV. The official ER is now 0.13%, but they have a new waiver in place until June 30, 2024 that discounts it to 0.07%. Still a very good deal IMO.

[Bill Bernstein]

It's darned good, but buying T-bills yourself is better.

If you're at Fido, you can buy the bills yourself and then autoroll them, which is even better, and I believe that Schwab just made autoroll available.

If you hold assets at Vanguard and you don't want the hassle of buying the bills yourself, in the long run you'll be better off with VUSXX. Too bad they don't offer autoroll. SGOV currently beats VUSXX by a few bp, but won't once the waver expires next year.

[chrisdds98]

As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

iShares has updated the ER information for SGOV. The official ER is now 0.13%, but they have a new waiver in place until June 30, 2024 that discounts it to 0.07%. Still a very good deal IMO.

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

https://bondbloxxetf.com/bondbloxx-bloo ... asury-etf/

[secondopinion]

As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

iShares has updated the ER information for SGOV. The official ER is now 0.13%, but they have a new waiver in place until June 30, 2024 that discounts it to 0.07%. Still a very good deal IMO.

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

https://bondbloxxetf.com/bondbloxx-bloo ... asury-etf/

I just cut out the middleman and hold them directly.

[Eno Deb]

It's darned good, but buying T-bills yourself is better.

If you're at Fido, you can buy the bills yourself and then autoroll them, which is even better, and I believe that Schwab just made autoroll available.

I do hold T-Bills (with longer durations than SGOV) at Fidelity. But there are some inconveniences. If you sell them it takes 2 days to settle. The auto-roll function blocks funds for the purchase of the new T-bills for a few days, and if you want to replicate SGOV's duration, that happens every few weeks. Schwab's auto-roll function doesn't have overlapping maturity/repurchases, so your money is out of the market until the next auction, which kills the return if you use very short T-Bills.

I think 0.07% is a very small price to pay for the convenience.

[chrisdds98]

As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

iShares has updated the ER information for SGOV. The official ER is now 0.13%, but they have a new waiver in place until June 30, 2024 that discounts it to 0.07%. Still a very good deal IMO.

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

https://bondbloxxetf.com/bondbloxx-bloo ... asury-etf/

I just cut out the middleman and hold them directly.

that works too. i would have to learn how to buy treasuries. i do like the easy liquidity of an etf, i don't think its quite so simple to trade treasuries before maturity. maybe it is, but is it worth the 3 basis points for me to figure it out?

[Eno Deb]

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

SGOV has a much shorter duration, so that's not comparable.

[secondopinion]

As the prospectus explains, the actual expense incurred by fund operations has been 0.12%, but Blackrock Fund Advisors have agreed to waive part of their management fees so that the net expense paid by any fund owner is 0.05%. It looks like the current agreement to do so ends tomorrow.

iShares has updated the ER information for SGOV. The official ER is now 0.13%, but they have a new waiver in place until June 30, 2024 that discounts it to 0.07%. Still a very good deal IMO.

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

https://bondbloxxetf.com/bondbloxx-bloo ... asury-etf/

I just cut out the middleman and hold them directly.

that works too. i would have to learn how to buy treasuries. i do like the easy liquidity of an etf, i don't think its quite so simple to trade treasuries before maturity. maybe it is, but is it worth the 3 basis points for me to figure it out?

Maybe, maybe not. I also use treasury bills to store a known expense that I am deferring to earn interest in the meantime (so it matures when I need it).

3 basis points is very low, I will admit.

[secondopinion]

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

SGOV has a much shorter duration, so that's not comparable.

It is, but I would think the risk is very low anyway. I would count both of them as cash either way; I would favor XHLF if I had to use an ETF/fund.

[fr4nc0]

The most recent 13 week T-bill investment rate is 5.409% while the SGOV 30 day yield is 5.15%. I still prefer the higher rate of T-bills. There's no commission charged at Fidelity where I hold them. I prefer a 80/20 or 70/30 ratio of 13 week T-bills to cash for spending purposes. The cash part of the Fidelity account is still earning a 7 day yield of 4.75% for me.

Putting 80% of my rainy day fund in SGOV and 20% in cash (for spending) at Fidelity just means a lower overall yield. If I need the entire rainy day fund, I can easily sell the T-bills in the secondary market.

Some brokers do charge a commission for T-bills. In those situations where ETF commissions are still free, then SGOV would be the best option other than switching brokers.

[JonFund]

I'm not sure I understand the "awkwardness" of buying treasury bills (or notes) direct. You can buy them direct from the Treasury, or if you want them in an IRA, you can buy them on the secondary market through a brokerage. I've built my own treasury ladder in my IRA (secondary market through Fidelity) and found it very simple and easy. The beauty of buying the individual treasuries and holding to maturity is that you have complete control over how much you are going to get paid in interest and when you are going to get paid. You don't get that in a bond fund. Credit risk is a non-issue as well, (vs corporates or muni's).

[Eno Deb]

too rich for my blood! I use XHLF - rolling 6 month treasuries at 3 basis points cost.

SGOV has a much shorter duration, so that's not comparable.

It is, but I would think the risk is very low anyway. I would count both of them as cash either way; I would favor XHLF if I had to use an ETF/fund.

Well, if you use it as cash equivalent XHLF is a worse deal as long as we are in a rising interest rate environment (it currently has a lower SEC yield than SGOV even with the slightly lower ER).

[Eno Deb]

I'm not sure I understand the "awkwardness" of buying treasury bills (or notes) direct. You can buy them direct from the Treasury, or if you want them in an IRA, you can buy them on the secondary market through a brokerage. I've built my own treasury ladder in my IRA (secondary market through Fidelity) and found it very simple and easy. The beauty of buying the individual treasuries and holding to maturity is that you have complete control over how much you are going to get paid in interest and when you are going to get paid. You don't get that in a bond fund. Credit risk is a non-issue as well, (vs corporates or muni's).

If you're talking about, say, 6-month or longer durations, you are absolutely right. But to approximately replicate SGOV you'd have to keep buying 4-week bills. That gets old quickly without auto-roll, and the latter has its own issues. SGOV is really more similar to a MMF than a treasury ladder, but performs better than most treasury MMFs and is fully state-tax exempt.

[the_wiki]

I think sometimes the fee aversion on this site is a bit much. We are here arguing about $70 per $100k fee to make managing your money a bit easier.
Can't even buy a year of music or movie streaming for that price. You probably spent more than that on a convenience or impulse purchase in the last week.

[chassis]

SGOV holds a constant 0-3 month treasury bill ladder. The expense ratio is 0.12% but only 0.05% for Fidelity accounts. The SEC yield is 5.13% which trumps money market funds. The fund rarely loses any value in a single day, but always makes it up the next day when it does. This appears to allow someone to hold a 3-month treasury bill ladder for the ultra-low cost of 0.05%, with perfect liquidity and divisibility to $100.

After experimenting with the awkwardness of TreasuryDirect and individual treasury bills, this fund seems like the perfect way to hold treasury bills. TreasuryDirect doesn't let you sell unless you transfer to a brokerage after 45 days of purchase. Individual treasury bills appear to have a lock out period where they can't be sold within a week of maturity. Constructing a full 3-month ladder would require purchasing 13 different individual treasury bills, which would take either 4-5 weeks of steady weekly purchases through TreasuryDirect, or a minimum of $13,000 trading individual $1000 bills.

Thus SGOV seems to dominate individual treasury bills and money market funds.

Best exposure to Treasury bills is to buy Treasury bills.

[secondopinion]

I think sometimes the fee aversion on this site is a bit much. We are here arguing about $70 per $100k fee to make managing your money a bit easier.
Can't even buy a year of music or movie streaming for that price. You probably spent more than that on a convenience or impulse purchase in the last week.

• What music or movie streaming service? I do not buy either.
• I spent about $250-$300 on optional purchases so far this year. $70 is a lot to spend on an impulse purchase.
• If I was spending $70, I rather spend it my way and not in fees.

[helloyou]

I am debating t-bills on the secondary market (manual laddering) vs. short term treasuries (in Europe).

- SPDR Bloomberg 1-3 Month T-Bill UCITS ETF
https://www.justetf.com/en/etf-profile. ... 00BJXRT698

- iShares USD Treasury Bond 0-1yr UCITS ETF (Acc)
https://www.justetf.com/en/etf-profile. ... 00BGSF1X88

- JPMorgan BetaBuilders US Treasury Bond 0-3 Months UCITS ETF USD (Acc)
https://www.justetf.com/en/etf-profile. ... 00BMD8KM66

Their bid ask spreads are lower than 0.1% I think, expense ratios are between 0.07% and 0.10%. Which should I get? I like the appeal of buying an ETF instead of doing ladder rollovers every month when a t bill matures.

[chassis]

I am debating t-bills on the secondary market (manual laddering) vs. short term treasuries (in Europe).

- SPDR Bloomberg 1-3 Month T-Bill UCITS ETF
https://www.justetf.com/en/etf-profile. ... 00BJXRT698

- iShares USD Treasury Bond 0-1yr UCITS ETF (Acc)
https://www.justetf.com/en/etf-profile. ... 00BGSF1X88

- JPMorgan BetaBuilders US Treasury Bond 0-3 Months UCITS ETF USD (Acc)
https://www.justetf.com/en/etf-profile. ... 00BMD8KM66

Their bid ask spreads are lower than 0.1% I think, expense ratios are between 0.07% and 0.10%. Which should I get? I like the appeal of buying an ETF instead of doing ladder rollovers every month when a t bill matures.

Manual ladder.

What is the total lifetime ladder difference in $ related to the 0.03% expense ratios? Is it a big number or a small number?

[jvini]

Is it certain that SGOV yield is state tax exempt, just like treasuries are? I can't seem to get a straight answer on that.

[helloyou]

I am debating t-bills on the secondary market (manual laddering) vs. short term treasuries (in Europe).

- SPDR Bloomberg 1-3 Month T-Bill UCITS ETF
https://www.justetf.com/en/etf-profile. ... 00BJXRT698

- iShares USD Treasury Bond 0-1yr UCITS ETF (Acc)
https://www.justetf.com/en/etf-profile. ... 00BGSF1X88

- JPMorgan BetaBuilders US Treasury Bond 0-3 Months UCITS ETF USD (Acc)
https://www.justetf.com/en/etf-profile. ... 00BMD8KM66

Their bid ask spreads are lower than 0.1% I think, expense ratios are between 0.07% and 0.10%. Which should I get? I like the appeal of buying an ETF instead of doing ladder rollovers every month when a t bill matures.

Manual ladder.

What is the total lifetime ladder difference in $ related to the 0.03% expense ratios? Is it a big number or a small number?

Well a 0.07% expense ratio would cost me around $80 in fees per year. Then there is small bid ask spread of 0.05% so we can probably add another $60 (0.12% in total in fees then). Then we need to also calculate NAV risk on resell but impossible to know beforehand. Then there is also a broker charge of about $50-60 to actually buy the ETF.

Manual t-bills there is no ER, only 5$ in fees per t-bill (so if I bought 4 that's 20, but then I need to repay 5$ every month the bill matures). However, if I forget to rollover, every lost day is lost interest so there is that too. Not sure the manual t -bill ladder is THAT better versus the JPMorgan 0-3m or iShares product above.

I did a calculation for a bill ladder over 4-5 months and I get an average of 5.37%. I don't think any of these t bill funds are far from that even after fees?

[Ultane]

Remember the taxes. Tbills you dont have to pay state, for this I'm guessing you do?

[helloyou]

Remember the taxes. Tbills you dont have to pay state, for this I'm guessing you do?

I am overseas but these European funds do not withhold any tax at the fund or broker level in Europe. In other words the bond funds are seen the same as t-bills. Of course, capital gain tax is due on the individual level as any other financial product (it would also apply to gains from t-bills).

[DaveTH]

Is it certain that SGOV yield is state tax exempt, just like treasuries are? I can't seem to get a straight answer on that.

In 2022, 92.61% of SGOV dividends were eligible for state tax exemption.

https://www.ishares.com/us/literature/t ... tamped.pdf

[jvini]

Is it certain that SGOV yield is state tax exempt, just like treasuries are? I can't seem to get a straight answer on that.

In 2022, 92.61% of SGOV dividends were eligible for state tax exemption.

https://www.ishares.com/us/literature/t ... tamped.pdf

Thanks!

[beyou]

It's darned good, but buying T-bills yourself is better.

If you're at Fido, you can buy the bills yourself and then autoroll them, which is even better, and I believe that Schwab just made autoroll available.

If you hold assets at Vanguard and you don't want the hassle of buying the bills yourself, in the long run you'll be better off with VUSXX. Too bad they don't offer autoroll. SGOV currently beats VUSXX by a few bp, but won't once the waver expires next year.

Except if you live in NY, CA, CT where repos interest is not state tax free. Then sgov wins over vusxx

[beyou]

Is it certain that SGOV yield is state tax exempt, just like treasuries are? I can't seem to get a straight answer on that.

Not 100% but almost. VUSXX may be much lower this year due to repos.

[erp]

I think sometimes the fee aversion on this site is a bit much. We are here arguing about $70 per $100k fee to make managing your money a bit easier.
Can't even buy a year of music or movie streaming for that price. You probably spent more than that on a convenience or impulse purchase in the last week.

And the ER isn't even really relevant if the actual return is better. I downloaded the last year's worth of 13wk tbill data + SGOV/USFR adjusted closing prices and calculated the actual yield of each (last 3 columns, not annualized). It looks like SGOV is close but has usually beaten 13wk tbills over each date range of issue date to maturity date. USFR beat them both.

I suppose this is because rates have been rising so fast this past year that locking in a rate for 13wks at a time has underperformed? People might need to reconsider the conventional wisdom of just autorolling tbills.

https://treasurydirect.gov/auctions/auction-query/
https://finance.yahoo.com/quote/SGOV/history?p=SGOV
https://finance.yahoo.com/quote/USFR/history?p=USFR

Code: Select all

CUSIP     Issue Date Maturity   Price     Tbill  SGOV   USFR
912797FA0 07/13/2023 10/12/2023 98.672917 1.345%  
912796YJ2 07/06/2023 10/05/2023 98.677972 1.340%  
912796CS6 06/29/2023 09/28/2023 98.690611 1.327%  
912796CR8 06/22/2023 09/21/2023 98.703250 1.314%  
912796CQ0 06/15/2023 09/14/2023 98.698194 1.319%  
912796YH6 06/08/2023 09/07/2023 98.680500 1.337%  
912796Z51 06/01/2023 08/31/2023 98.660278 1.358%  
912796Z44 05/25/2023 08/24/2023 98.672917 1.345%  
912796Z36 05/18/2023 08/17/2023 98.720944 1.296%  
912796XY0 05/11/2023 08/10/2023 98.700722 1.316%  
912796Y37 05/04/2023 08/03/2023 98.705778 1.311%  
912796Y29 04/27/2023 07/27/2023 98.719681 1.297%  
912796ZZ5 04/20/2023 07/20/2023 98.715889 1.301%  
912796XQ7 04/13/2023 07/13/2023 98.741167 1.275%  
912796ZS1 04/06/2023 07/06/2023 98.791722 1.223% 1.234% 1.400%
912796ZR3 03/30/2023 06/29/2023 98.818264 1.196% 1.249% 1.339%
912796ZQ5 03/23/2023 06/22/2023 98.818264 1.196% 1.219% 1.422%
912796X53 03/16/2023 06/15/2023 98.799306 1.215% 1.219% 1.342%
912796ZP7 03/09/2023 06/08/2023 98.795514 1.219% 1.239% 1.282%
912796ZG7 03/02/2023 06/01/2023 98.799306 1.215% 1.209% 1.282%
912796ZF9 02/23/2023 05/25/2023 98.806889 1.208% 1.185% 1.282%
912796W47 02/16/2023 05/18/2023 98.817000 1.197% 1.175% 1.278%
912796ZE2 02/09/2023 05/11/2023 98.839750 1.174% 1.185% 1.318%
912796YW3 02/02/2023 05/04/2023 98.838486 1.175% 1.155% 1.258%
912796YV5 01/26/2023 04/27/2023 98.843542 1.170% 1.177% 1.238%
912796V48 01/19/2023 04/20/2023 98.847333 1.166% 1.217% 1.218%
912796YU7 01/12/2023 04/13/2023 98.847333 1.166% 1.167% 1.178%
912796YN3 01/05/2023 04/06/2023 98.885250 1.127% 1.167% 1.198%
912796YM5 12/29/2022 03/30/2023 98.900417 1.112% 1.105% 1.158%
912796U31 12/22/2022 03/23/2023 98.915583 1.096% 1.105% 1.129%
912796YL7 12/15/2022 03/16/2023 98.920639 1.091% 1.116% 1.170%
912796YK9 12/08/2022 03/09/2023 98.920639 1.091% 1.052% 1.210%
912796YB9 12/01/2022 03/02/2023 98.916847 1.095% 1.083% 1.216%
912796T33 11/25/2022 02/23/2023 98.945000 1.066% 1.057% 1.196%
912796YA1 11/17/2022 02/16/2023 98.949708 1.061% 1.047% 1.152%
912796XZ7 11/10/2022 02/09/2023 98.958556 1.052% 1.007% 1.051%
912796XT1 11/03/2022 02/02/2023 98.971194 1.040% 0.997% 1.152%
912796S34 10/27/2022 01/26/2023 98.988889 1.021% 0.964% 1.051%
912796XS3 10/20/2022 01/19/2023 99.034389 0.975% 0.944% 1.011%
912796XR5 10/13/2022 01/12/2023 99.112750 0.895% 0.944% 0.971%
912796X95 10/06/2022 01/05/2023 99.155722 0.851% 0.883% 0.951%
912796R27 09/29/2022 12/29/2022 99.173417 0.833% 0.890% 0.931%
912796X87 09/22/2022 12/22/2022 99.173417 0.833% 0.870% 0.864%
912796X79 09/15/2022 12/15/2022 99.222708 0.783% 0.830% 0.864%
912796X61 09/08/2022 12/08/2022 99.250514 0.755% 0.803% 0.904%
912796P94 09/01/2022 12/01/2022 99.272000 0.733% 0.752% 0.798%
912796W70 08/25/2022 11/25/2022 99.299778 0.705% 0.722% 0.818%
912796W62 08/18/2022 11/17/2022 99.340250 0.664% 0.697% 0.748%
912796W54 08/11/2022 11/10/2022 99.347833 0.656% 0.687% 0.788%
912796N96 08/04/2022 11/03/2022 99.370583 0.633% 0.647% 0.688%
912796V71 07/28/2022 10/27/2022 99.363000 0.641% 0.632% 0.748%
912796V63 07/21/2022 10/20/2022 99.375639 0.628% 0.592% 0.622%
912796V55 07/14/2022 10/13/2022 99.466639 0.536% 0.562% 0.602%
912796M89 07/07/2022 10/06/2022 99.532361 0.470% 0.542% 0.562%
912796U64 06/30/2022 09/29/2022 99.557639 0.444% 0.494% 0.522%
912796U56 06/23/2022 09/22/2022 99.577861 0.424% 0.464% 0.498%
912796U49 06/16/2022 09/15/2022 99.585444 0.416% 0.444% 0.458%
912796M71 06/09/2022 09/08/2022 99.689083 0.312% 0.414% 0.418%
912796T66 06/02/2022 09/01/2022 99.716889 0.284% 0.363% 0.398%
912796T58 05/26/2022 08/25/2022 99.732056 0.269% 0.331% 0.318%
912796T41 05/19/2022 08/18/2022 99.734583 0.266% 0.296% 0.277%
912796L64 05/12/2022 08/11/2022 99.772500 0.228% 0.276% 0.217%
912796S67 05/05/2022 08/04/2022 99.769972 0.231% 0.246% 0.217%
912796S59 04/28/2022 07/28/2022 99.775028 0.225% 0.195% 0.078%
912796S42 04/21/2022 07/21/2022 99.782611 0.218% 0.185% 0.175%
912796K57 04/14/2022 07/14/2022 99.801569 0.199% 0.167% 0.215%
912796R68 04/07/2022 07/07/2022 99.830639 0.170% 0.165% 0.195%

[wintermute]

GABXX is an alternative. Last I checked it was 100% treasuries and .08 ER.

[DaveTH]

GABXX is an alternative. Last I checked it was 100% treasuries and .08 ER.

May not be a option for some since it is not widely available on all platforms and often has a transaction fee.

[LuxeFire]

Instead of using the T-bills ladder for their safe cash, has anyone considered the idea of buying the treasury Floating Rate Note? What I like about the FRN is that it has a 2Y maturity but a quarterly reset based on 13W T-bill rate + spread. So effectively, you have the same duration as the 13-week T-bill, and you earn a bit of spread on top. As long as you don't need to liquidate before 2Y maturity, you come out ahead of 13W T-bill with autoroll. And if there is an emergency need for cash, I am sure you will be able to liquidate the FRN in the secondary market (which is the risk I am willing to take for avoiding any ETF management fees). Any thoughts?

[countmein]

Can anyone explain why the price of SGOV has risen over the past two years? Shouldn't it have fallen like all other bonds?

[DonIce]

Can anyone explain why the price of SGOV has risen over the past two years? Shouldn't it have fallen like all other bonds?

The effective duration is too short to have the price significantly hit by interest rate increases. At a 0.09 year effective duration, a 1% rise in interest rates would cause only a 0.09% drop in the price of the fund.

The price from day to day now also reflects the accrual of interest in between payouts, which now is significant but 2 years ago was essentially zero. Hence 2 years ago the price of SGOV sat constantly flat throughout the month since there was zero payout, whereas now you can see the price linearly ramping up throughout the month, jumping down by the amount of the interest payout at the end of the month, and repeating that monthly.

[FedGuy]

Are there any significant advantages or disadvantages to BIL vs. SGOV? To me, they seem to be roughly the same thing.

[placeholder]

Can anyone explain why the price of SGOV has risen over the past two years? Shouldn't it have fallen like all other bonds?

I recommend reading up on why and by how much the price of a bond rises or falls when rates change.

[dcabler]

Are there any significant advantages or disadvantages to BIL vs. SGOV? To me, they seem to be roughly the same thing.

This article sums it up. BIL holds T-Bills with 1-3 months till maturity whereas SGOV holds T-Bills with 0-3 months till maturity.
They conclude that they're relatively equivalent.

https://www.thestreet.com/etffocus/divi ... st-for-you

etf.com did a comparison here: https://www.etf.com/etfanalytics/etf-co ... GOV-vs-BIL

Cheers.

[beyou]

I do hold T-Bills (with longer durations than SGOV) at Fidelity. But there are some inconveniences. If you sell them it takes 2 days to settle. The auto-roll function blocks funds for the purchase of the new T-bills for a few days, and if you want to replicate SGOV's duration, that happens every few weeks. Schwab's auto-roll function doesn't have overlapping maturity/repurchases, so your money is out of the market until the next auction, which kills the return if you use very short T-Bills.

I think 0.07% is a very small price to pay for the convenience.

Agreed on small price to pay.

But I am confused by the comment that it takes 2 days to settle tbill sales. Treasury securities, when traded by mutual fund and other institutional investors, settle next day. Most other securities, other bonds, equities, settle T+2. SGOV as of today would also settle a sale 2 days later. But I don’t understand why Fidelity does not settle treasury securities next day.

https://www.investopedia.com/terms/s/settlementdate.asp

“settlement date for stocks and bonds is usually two business days after the execution date (T+2). For government securities and options, it's the next business day (T+1)”

There is an industry plan to move settlements to T+1 in 2024
https://www.dtcc.com/ust1

“SEC adopted final requirements for a May 28, 2024, implementation date for the move to T+1 settlement for transactions in US cash equities, corporate debt, and unit investment trusts.”

More reading for those interested on how and why we could but so not settle same day.

https://www.dtcc.com/dtcc-connection/ar ... ks-at-dtcc

Of course if you use VUSXX then today you can get next day access to proceeds of sales, or even write checks against the balance at Vanguard brokerage. So for now I use this convenience, slightly better in that way than SGOV, much more convenient that individual tbills, but of course less yield than SGOV or what we could contruct in our own tbill portfolio. Most investments maximal return is most important, including lowest expenses, but for mmkt I think accessibility is important too, if used for cash mgmt or emergency fund.

https://www.schwab.com/learn/story/how- ... out-market

“Mutual fund trades typically settle the next business day, or T+1. So it's possible you could get your money as soon as the day after you sell. The settlement time for money market mutual funds could be same day or up to T+1, “

[jvini]

I remain a big fan of SGOV in both my brokerage account and IRA. At the current rate it's good as a cash equivalent and as my majority fixed income allocation, along with some 1 year treasuries.
I like the liquidity and don't mind waiting 2 days for settlement. I just plan ahead and keep a small cushion of cash in my Ally account. It's a weird time for bonds. I believe the Fed when they say higher for longer, and when they say they're done I'll switch some bond holdings into an intermediate term Treasury fund (VGIT).

[FedGuy]

Are there any significant advantages or disadvantages to BIL vs. SGOV? To me, they seem to be roughly the same thing.

This article sums it up. BIL holds T-Bills with 1-3 months till maturity whereas SGOV holds T-Bills with 0-3 months till maturity.
They conclude that they're relatively equivalent.

https://www.thestreet.com/etffocus/divi ... st-for-you

etf.com did a comparison here: https://www.etf.com/etfanalytics/etf-co ... GOV-vs-BIL

Cheers.

Thanks, dcabler! From my read of the article, the main difference between the two is that SGOV, at least for the time being, charges a lower fee, and as a result yields a bit more. Since the other differences are largely a wash or at least close enough, at least for now SGOV seems to be the winner.

[Wiggums]

I buy t-bills myself with the duration needed. At some point, when the interest rates fall, the short term investors will wished that they held a longer duration.

[dcabler]

Are there any significant advantages or disadvantages to BIL vs. SGOV? To me, they seem to be roughly the same thing.

This article sums it up. BIL holds T-Bills with 1-3 months till maturity whereas SGOV holds T-Bills with 0-3 months till maturity.
They conclude that they're relatively equivalent.

https://www.thestreet.com/etffocus/divi ... st-for-you

etf.com did a comparison here: https://www.etf.com/etfanalytics/etf-co ... GOV-vs-BIL

Cheers.

Thanks, dcabler! From my read of the article, the main difference between the two is that SGOV, at least for the time being, charges a lower fee, and as a result yields a bit more. Since the other differences are largely a wash or at least close enough, at least for now SGOV seems to be the winner.

Yep, that's the conclusion I drew as well. At least for the short end of the T-Bills yield curve, either of these are good choices dominated more by e/r than anything else. If you want something with a little more duration, along with associated risk, then SHV is another option. It's mostly T-Bills but it also holds some T-Notes.

Disclosure: I own T-Bills at TD. I'm autorolling 4 week issues. I own two positions offset by two weeks. This is just money set aside for some home improvements and I want quick access for when we finally start our projects. I also own another cash-like position, ICSH. I retired in June and don't plan on withdrawing from my portfolio till Jan. So, just withdrawing from ICSH every month through the end of the year. It has a slightly higher yield than most of the funds mentioned. But (gasp!!!) it is a manged fund, albeit a fairly inexpensive one...

Cheers.

[jvini]

I buy t-bills myself with the duration needed. At some point, when the interest rates fall, the short term investors will wished that they held a longer duration.

True about duration, although I'm glad I missed out on long duration returns in 2022. It saved me 150k+. I'm ok coming a little late to the long duration party.

[Eno Deb]

I buy t-bills myself with the duration needed. At some point, when the interest rates fall, the short term investors will wished that they held a longer duration.

If you held intermediate term bonds they have lost about 5% YTD, and had lower yields than short term bonds on top (not to mention the even bigger losses from 2020-2022). There will be plenty of time to switch to longer durations when the interest rate environment changes.

[smartinvestor2020]

I buy t-bills myself with the duration needed. At some point, when the interest rates fall, the short term investors will wished that they held a longer duration.

If you held intermediate term bonds they have lost about 5% YTD, and had lower yields than short term bonds on top (not to mention the even bigger losses from 2020-2022). There will be plenty of time to switch to longer durations when the interest rate environment changes.

Agreed. There will be plenty of time to move from short to longer durations.

[Electron]

Here is a chart showing the monthly rise in SGOV followed by the fund going ex-dividend.

https://schrts.co/HdtdwqTE

The fund may have an advantage over VUSXX for the state tax exemption this year but the tax reporting would be more complicated with the variable NAV.

[FedGuy]

Here is a chart showing the monthly rise in SGOV followed by the fund going ex-dividend.

https://schrts.co/HdtdwqTE

The fund may have an advantage over VUSXX for the state tax exemption this year but the tax reporting would be more complicated with the variable NAV.

I get that the price rises throughout the month because you're essentially buying the monthly dividend (someone who buys SGOV on the 25th has to pay more than someone who buys on the 5th because he holds it for fewer days but receives the same dividend). Does that mean a potential investor should be indifferent regarding the purchase date? For example, is there any advantage to waiting for the beginning of the month to buy cheaper shares, or does the wait for the dividend eliminate any advantage from doing so?