T-bills vs. T-bill ETF - seeking thoughts on pros and cons

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megaroth
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T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by megaroth »

Hi,

I like the idea of buying T-bills directly (no fund expense overhead, certainty of value when holding to maturity), but I'm concerned about time gaps involved with "rolling" the funds from one maturing T-bill into the next.

(For this discussion, please assume that I'd prefer to buy new T-bills at auction and that the auto-roll feature offered by some brokerages is *not* an option for me.)

I would plan to stagger purchases and try to buy into the next auction ASAP, leaving at most a few days of time before the next T-bill purchase settles, but I'm still concerned about the fact that default settlement funds at my (preferred) big brokerages are typically not FDIC-insured (or similarly safe - e.g., Treasury money market). Also, other events could also result in gaps, possibly lengthier ones (e.g., medical or other personal crisis, brokerage site unavailable, etc.).

With that in mind, I'm looking at ETFs that invest in T-bills and T-bonds that mature in T-bill-like timeframes. The 2 funds I'm considering are:
(1) BIL: SSGA SPDR Bloomberg 1-3 Month T-Bill ETF (https://www.ssga.com/us/en/intermediary ... l-etf-bil])
(2) SGOV: (BlackRock) iShares 0-3 Month Treasury Bond ETF (https://www.ishares.com/us/products/314 ... -bond-etf )

The downsides (that I'm aware of) with using ETFs would be the expense ratio and the inability to "hold to maturity".

Questions:
(1) Are there any other downsides to using these ETFs (or similar ones, if they exist) vs. buying individual T-bills? Any other considerations that I'm not factoring in?
(2) What are your thoughts on the ETFs listed above? Would you recommend one over the other (or another one entirely)?
(3) If I were to buy through TreasuryDirect, would the T-bills settle as FDIC-insured cash at maturity? (I'd prefer to use a brokerage, all else equal, but this might be an interesting reason to consider TreasuryDirect.)

Thanks for your thoughts.
Last edited by megaroth on Wed Mar 15, 2023 12:36 am, edited 4 times in total.
Impatience
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Impatience »

Check out Fidelity. You may enroll in their auto-roll feature when buying a treasury at auction and they will automatically extend you a brief credit to open a new position immediately upon the expiry of the first.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by chem6022 »

I'm lazy. I would prefer SGOV and its currently net 0.05 ER. Though I have not actually pulled the trigger though on moving my HYSA into there yet (see lazy).
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by DaveTH »

You may also want to consider either the TFLO or USFR ETFs. They basically autoroll 13-wk tbills and provide monthly distributions. Both have outperformed SGOV.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by hudson »

DaveTH wrote: Wed Mar 15, 2023 5:33 am You may also want to consider either the TFLO or USFR ETFs. They basically autoroll 13-wk tbills and provide monthly distributions. Both have outperformed SGOV.
Thanks DaveTH!
The convenience is attractive.
Expense ratios (ER):
TFLO .15
USFR .15
SGOV .12 (.05 through June 30th) https://www.ishares.com/us/products/314 ... y-bond-etf
EDIT ADDED: BILS .135
A .15% ER is $150 on a $100K investment. (15 basis points) (You already knew all of this!)
Last edited by hudson on Thu Mar 16, 2023 6:07 am, edited 2 times in total.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by paul e »

I could be way off base here but with a bond fund/etf, the NAV of your account can go down . With a T bill, that wont happen. The only risk you have with a t bill is interest rate risk, ie, that you could be earning higher rates elsewhere. There is no NAV to go down with a t bill and your interest rate wont change til maturity.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by mega317 »

The ETFs mentioned in this thread are exactly the same as a rolling bill ladder except for the expense ratio. For the situation where you want short-term cash but without a defined date the money is needed, I strongly prefer ETFs just for simplicity. (There is also very little difference between a treasury fund of duration 1 month and a treasury money market fund.) If you have a need for a specific dollar amount on a specific date then individual bills obviously make more sense.

There is no difference between the NAV of a treasury ETF going down and the value of a portfolio of individual bills going down. Except with the bills it's easier to close your eyes and say "lalalala" and ignore it.

I don't think I know of any other ETFs that are quite as short as the ones already mentioned. Slightly longer would be SHV, XHLF, BILS.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by megaroth »

Thanks to everyone for the helpful comments. New plan is to go 50/50 between SGOV and BIL.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by apezam »

Check out these:
https://www.ustreasuryetf.com/
TBIL OR XBIL look attractive at the moment if one doesn’t want to manage individual bills
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Kevin M »

mega317 wrote: Wed Mar 15, 2023 12:29 pm The ETFs mentioned in this thread are exactly the same as a rolling bill ladder except for the expense ratio. For the situation where you want short-term cash but without a defined date the money is needed, I strongly prefer ETFs just for simplicity. (There is also very little difference between a treasury fund of duration 1 month and a treasury money market fund.) If you have a need for a specific dollar amount on a specific date then individual bills obviously make more sense.

There is no difference between the NAV of a treasury ETF going down and the value of a portfolio of individual bills going down. Except with the bills it's easier to close your eyes and say "lalalala" and ignore it.

I don't think I know of any other ETFs that are quite as short as the ones already mentioned. Slightly longer would be SHV, XHLF, BILS.
One difference between a rolling ladder and a fund is that you can choose not to roll some or all of a maturing Treasury without having to worry about potential NAV loss in selling fund shares. This isn't exactly a rolling ladder, but that's one point for me in holding individual Treasuries.

A difference between short duration ETF and a money market fund is that the latter seeks to maintain a stable $1 per share price (and for the most part does), while there can be NAV changes in the former.
If I make a calculation error, #Cruncher probably will let me know.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by mega317 »

Kevin you're not wrong. But at the same time the historical spread on the NAV of these short treasury funds is on the order of 0.5% all time. Is that of any significance for most investors who have short term investments with no defined use for the money? Let's say I have a chunk of cash in SGOV and I emergently need a new car or roof. If I bought SGOV at all-time high and have to sell at all-time low I'm out like 100 bucks. To me that risk is worth not having to manage a portfolio of individual bonds. It's not materially worse than paying an expense ratio. In my own case I have decided to pay the ER and take the capital risk in exchange for simplicity.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by chrisdds98 »

megaroth wrote: Wed Mar 15, 2023 10:33 pm Thanks to everyone for the helpful comments. New plan is to go 50/50 between SGOV and BIL.
why would you prefer the super short duration to something like xhlf (6 month treasury etf) higher yield and minimal duration risk with a lower expense ratio?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by megaroth »

Thanks for the additional thoughts.

Re: why not BILS or SHV, I might consider those down the road, but I'm opting for the (presumably) lower NAV volatility. I'm assuming that generally, if held over time, the delta on returns and volatility between BIL/SGOV vs. BILS/SHV is probably fairly minimal given the small difference in portfolio duration, but I decided to favor (likely minimally) lower volatility and accept the tradeoff of (likely minimally) lower returns by going with BIL/SGOV for now.

Re: why not XHLF, I'd probably opt for BILS/SHV because I'm more familiar with BlackRock and SSGA and have more trust in them (hopefully well-founded, but always hard to say for sure) for that reason.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by wenchleaf »

megaroth wrote: Wed Mar 15, 2023 10:33 pm Thanks to everyone for the helpful comments. New plan is to go 50/50 between SGOV and BIL.
Why did you decide against USFR/TFLO?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by megaroth »

Re: TFLO/USFR, the floating-rate T-bond concept is interesting, but I wasn't clear on the advantage vs. a fund that holds short-term T-bills. Seems to add complexity, and I'd rather not do that unless I can clearly understand the benefit. That said, I would definitely be open to hearing more about why these funds might/would be a superior option vs. BIL/SGOV.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by aristotelian »

I prefer the simplicity of ETF, especially in taxable account.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Hector »

I find VMRXX Vanguard Cash Reserves Federal Money Market Fund Admiral Shares convenient compare to ultra short term ETFs that are discussed here.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by megaroth »

Hector wrote: Sun Mar 26, 2023 6:34 pm I find VMRXX Vanguard Cash Reserves Federal Money Market Fund Admiral Shares convenient compare to ultra short term ETFs that are discussed here.
I'd probably consider holding Vanguard Treasury Money Market Fund (VUSXX), which would be the closest-matched and lowest-expense money market alternative that I'm aware of, but I don't think I have access to that fund (Vanguard-only, if I recall, and that's not an option for various reasons).

VMRXX has non-Treasury-backed/uninsured holdings, which I'd prefer to avoid. From the VMRXX site page (Fund Management section - https://investor.vanguard.com/investmen ... management):

As government securities, the fund’s holdings have very high credit quality, although some are not backed by the full faith and credit of the U.S. government. The fund invests more than 25% of its assets in securities issued by companies in the financial services industry, which includes securities issued by certain government-sponsored enterprises.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by hudson »

megaroth wrote: Sun Mar 26, 2023 10:06 pm
Hector wrote: Sun Mar 26, 2023 6:34 pm I find VMRXX Vanguard Cash Reserves Federal Money Market Fund Admiral Shares convenient compare to ultra short term ETFs that are discussed here.
VMRXX has non-Treasury-backed/uninsured holdings, which I'd prefer to avoid. From the VMRXX site page (Fund Management section - https://investor.vanguard.com/investmen ... management):
I'd probably pass on VMRXX for the same reasons, but it's Vanguard risk level 1 which is something.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Hector »

Regarding SGOV and BIL, why are their yield to worst very different?
4.63% for SGOV https://www.ishares.com/us/products/314 ... y-bond-etf
4.07% for BIL https://www.ssga.com/us/en/individual/e ... ll-etf-bil
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Hector »

hudson wrote: Mon Mar 27, 2023 5:30 am
megaroth wrote: Sun Mar 26, 2023 10:06 pm
Hector wrote: Sun Mar 26, 2023 6:34 pm I find VMRXX Vanguard Cash Reserves Federal Money Market Fund Admiral Shares convenient compare to ultra short term ETFs that are discussed here.
VMRXX has non-Treasury-backed/uninsured holdings, which I'd prefer to avoid. From the VMRXX site page (Fund Management section - https://investor.vanguard.com/investmen ... management):
I'd probably pass on VMRXX for the same reasons, but it's Vanguard risk level 1 which is something.
Makes sense. I dont have option to get Vanguard Treasury Only MM fund. But I am going to switch VMRXX Vanguard Cash Reserves Federal Money Market Fund Admiral Shares with FRSXX Fidelity Investments Money Market Treasury Only Portfolio - Institutional Class
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by abcx »

Hector wrote: Mon Mar 27, 2023 9:15 am Regarding SGOV and BIL, why are their yield to worst very different?
4.63% for SGOV https://www.ishares.com/us/products/314 ... y-bond-etf
4.07% for BIL https://www.ssga.com/us/en/individual/e ... ll-etf-bil
Anybody know the answer to this?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by anoop »

If this is in taxable it will probably generate a bunch of micro transactions for the expense ratio. Could it generate any capital gains that would be subject to state tax?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by mega317 »

abcx wrote: Wed Apr 19, 2023 1:23 am
Hector wrote: Mon Mar 27, 2023 9:15 am Regarding SGOV and BIL, why are their yield to worst very different?
4.63% for SGOV https://www.ishares.com/us/products/314 ... y-bond-etf
4.07% for BIL https://www.ssga.com/us/en/individual/e ... ll-etf-bil
Anybody know the answer to this?
The gap is now 14 basis points.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by grabiner »

Hector wrote: Mon Mar 27, 2023 9:15 am Regarding SGOV and BIL, why are their yield to worst very different?
4.63% for SGOV https://www.ishares.com/us/products/314 ... y-bond-etf
4.07% for BIL https://www.ssga.com/us/en/individual/e ... ll-etf-bil
One possible issue is different portfolio dates; I tried to compare the funds on Morningstar and found that the statistics were from dates a month apart.

And SGOV now reports 4.06%, versus 4.20% for BIL, so I believe you were looking at old data. SGOV does have the higher SEC yield at 4.69% (would be 4.61% without the fee waiver) versus 4.54%.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by grabiner »

anoop wrote: Wed Apr 19, 2023 2:17 am If this is in taxable it will probably generate a bunch of micro transactions for the expense ratio. Could it generate any capital gains that would be subject to state tax?
The ETFs are likely to hold bills to maturity and thus not generate any capital gains. However, when you sell the ETF, you will owe state tax on any gain (except in NJ if these funds are registered as "qualified investment funds"). If you buy Treasury bills and hold them to maturity, there is no capital gain.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Bogle-007 »

grabiner wrote: Wed Apr 19, 2023 7:37 pm
anoop wrote: Wed Apr 19, 2023 2:17 am If this is in taxable it will probably generate a bunch of micro transactions for the expense ratio. Could it generate any capital gains that would be subject to state tax?
The ETFs are likely to hold bills to maturity and thus not generate any capital gains. However, when you sell the ETF, you will owe state tax on any gain (except in NJ if these funds are registered as "qualified investment funds"). If you buy Treasury bills and hold them to maturity, there is no capital gain.
Wow - I just learned something new from your post... Selling a T-bill before maturity results in a capital gain... and that probably means you would lose the state tax exemption too, correct?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by grabiner »

Bogle-007 wrote: Wed Apr 19, 2023 10:42 pm
grabiner wrote: Wed Apr 19, 2023 7:37 pm
anoop wrote: Wed Apr 19, 2023 2:17 am If this is in taxable it will probably generate a bunch of micro transactions for the expense ratio. Could it generate any capital gains that would be subject to state tax?
The ETFs are likely to hold bills to maturity and thus not generate any capital gains. However, when you sell the ETF, you will owe state tax on any gain (except in NJ if these funds are registered as "qualified investment funds"). If you buy Treasury bills and hold them to maturity, there is no capital gain.
Wow - I just learned something new from your post... Selling a T-bill before maturity results in a capital gain... and that probably means you would lose the state tax exemption too, correct?
The capital gain (or loss) will be very small, because the accrued interest is added to the principal.

Suppose that you buy a 3-month T-Bill for $991 (value $1000 at maturity). One month before maturity, yields have fallen, and you sell for $998 (this would require a decline in yield from 3.65% to 2.41% for the full $1 loss). You have $6 in accrued interest which is exempt from state tax, and a $1 capital gain which is taxable in most states. I know that MD, NJ, and VA do not tax capital gains on individual Treasury bonds; NJ is the only state I know which doesn't tax capital gains on funds which hold them.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by anoop »

The reason I brought up the tax issue is that even though it may not be material in $ terms it has the potential to add some work to preparing the return, especially if importing the 1099 doesn’t work correctly and one has to enter the numbers manually.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Drew31 »

Bumping this thread back as recently discovered the new(ish) BondBloxx Treasury ETFs.

https://bondbloxxetf.com/products/

Presently I have a rolling ladder of Individual Bills with no plans to spend it. It is essentially my break glass option in case of job loss.

XLF (6mo Treasury ETF) and XONE (1yr Treasury ETF) at ER's of .03% I have found very tempting to switch my ladder.

My pros for the ETF:
-Easier to add smaller amounts vs waiting to load up to buy a full $1,000 bond
-Slightly simpler to manage
-Easier on heirs should something happen to me
-Very low ER at .03 is essentially $3 per $10K.
-Don't have to wait for auctions, or pay spread on secondary market
-.01 spreads

My cons:
-New
-Low volume
-Still a cost vs free to buy myself
-If I desire to switch from rolling, to non-rolling at some point in future, I do risk NAV loss...though a lower concern with the <1yr durations.

I'm very, very tempted to switch so writing out my thoughts first and maybe others have recent experiences.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by 2Dog »

Generally, I prefer to NOT pay for something I can do myself......
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Drew31 »

2Dog wrote: Sun May 28, 2023 1:10 pm Generally, I prefer to NOT pay for something I can do myself......
I'm with you on this.... but, on occasion I will certainly pay for something if the time v. cost benefits me or if it may simplify something I would otherwise have to do. Trying myself to figure out if this is one of those times or not.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by anon_investor »

Drew31 wrote: Sun May 28, 2023 12:41 pm Bumping this thread back as recently discovered the new(ish) BondBloxx Treasury ETFs.

https://bondbloxxetf.com/products/

Presently I have a rolling ladder of Individual Bills with no plans to spend it. It is essentially my break glass option in case of job loss.

XLF (6mo Treasury ETF) and XONE (1yr Treasury ETF) at ER's of .03% I have found very tempting to switch my ladder.

My pros for the ETF:
-Easier to add smaller amounts vs waiting to load up to buy a full $1,000 bond
-Slightly simpler to manage
-Easier on heirs should something happen to me
-Very low ER at .03 is essentially $3 per $10K.
-Don't have to wait for auctions, or pay spread on secondary market
-.01 spreads

My cons:
-New
-Low volume
-Still a cost vs free to buy myself
-If I desire to switch from rolling, to non-rolling at some point in future, I do risk NAV loss...though a lower concern with the <1yr durations.

I'm very, very tempted to switch so writing out my thoughts first and maybe others have recent experiences.
At Fidelity I would just autoroll T-Bills and keep any amount under $1k in a settlement fund (getting some yield) versus paying for the ER of an ETF.

I actually so this for some of my emergency fund.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Drew31 »

True in current environment where settlement fund is generally yielding more than anything.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by me8000 »

megaroth wrote: Wed Mar 15, 2023 12:07 am (1) Are there any other downsides to using these ETFs (or similar ones, if they exist) vs. buying individual T-bills? Any other considerations that I'm not factoring in?
I have the same question and one downside I never see mentioned is the credit (institutional) risk of treasury based ETFs. Buy T-bills and the US Treasury has a direct obligation to you. Buy an ETF and the US government has no obligation to make the contract between you and the investment firm whole, except through a regulatory/law enforcement process. The investment firm could end up with a shortfall in underlying treasury holdings and fail, whether due to incompetency, dishonesty or theft. Trading in the ETF could be halted due to various reasons, and the firm could suffer from a liquidity crisis and not be able to fulfill orders.

The institutional risk is probably low, except in dire market conditions yet I think it is a consideration in portfolios that have a significant percentage of "indirect" government backed securities such as ETFs.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by secondopinion »

Drew31 wrote: Sun May 28, 2023 7:01 pm True in current environment where settlement fund is generally yielding more than anything.
After taxes and fees, it is better off rolling treasury bills manually for me.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by daacrusher2001 »

Am I missing something important…various money market funds offer similar or better yields. Aside from possibly not being taxed by my state on the income from a T-Bill fund, what am I getting that makes one of these short duration funds better than a money market?
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by bberris »

Drew31 wrote: Sun May 28, 2023 12:41 pm Bumping this thread back as recently discovered the new(ish) BondBloxx Treasury ETFs.

https://bondbloxxetf.com/products/

Presently I have a rolling ladder of Individual Bills with no plans to spend it. It is essentially my break glass option in case of job loss.

XLF (6mo Treasury ETF) and XONE (1yr Treasury ETF) at ER's of .03% I have found very tempting to switch my ladder.

My pros for the ETF:
-Easier to add smaller amounts vs waiting to load up to buy a full $1,000 bond
-Slightly simpler to manage
-Easier on heirs should something happen to me
-Very low ER at .03 is essentially $3 per $10K.
-Don't have to wait for auctions, or pay spread on secondary market
-.01 spreads

My cons:
-New
-Low volume
-Still a cost vs free to buy myself
-If I desire to switch from rolling, to non-rolling at some point in future, I do risk NAV loss...though a lower concern with the <1yr durations.

I'm very, very tempted to switch so writing out my thoughts first and maybe others have recent experiences.
I think you mean XHLF, not XLF, a financial sector fund. Trading volume is too low for me.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by WhitePuma »

DaveTH wrote: Wed Mar 15, 2023 5:33 am You may also want to consider either the TFLO or USFR ETFs. They basically autoroll 13-wk tbills and provide monthly distributions. Both have outperformed SGOV.
Apples-to-oranges to compare these to SGOV. Performance differs because risk differs.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by DaveTH »

WhitePuma wrote: Wed Jun 28, 2023 9:00 am
DaveTH wrote: Wed Mar 15, 2023 5:33 am You may also want to consider either the TFLO or USFR ETFs. They basically autoroll 13-wk tbills and provide monthly distributions. Both have outperformed SGOV.
Apples-to-oranges to compare these to SGOV. Performance differs because risk differs.
Not really. Both of these only hold very short-term T-bills (up to 3 months). The major difference is that USFR/TFLO focuses on continuously rolling 3-month bills. Because the rates get reset weekly, there is minimum duration risk.
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by chrisdds98 »

bberris wrote: Wed Jun 28, 2023 8:42 am
Drew31 wrote: Sun May 28, 2023 12:41 pm Bumping this thread back as recently discovered the new(ish) BondBloxx Treasury ETFs.

https://bondbloxxetf.com/products/

Presently I have a rolling ladder of Individual Bills with no plans to spend it. It is essentially my break glass option in case of job loss.

XLF (6mo Treasury ETF) and XONE (1yr Treasury ETF) at ER's of .03% I have found very tempting to switch my ladder.

My pros for the ETF:
-Easier to add smaller amounts vs waiting to load up to buy a full $1,000 bond
-Slightly simpler to manage
-Easier on heirs should something happen to me
-Very low ER at .03 is essentially $3 per $10K.
-Don't have to wait for auctions, or pay spread on secondary market
-.01 spreads

My cons:
-New
-Low volume
-Still a cost vs free to buy myself
-If I desire to switch from rolling, to non-rolling at some point in future, I do risk NAV loss...though a lower concern with the <1yr durations.

I'm very, very tempted to switch so writing out my thoughts first and maybe others have recent experiences.
I think you mean XHLF, not XLF, a financial sector fund. Trading volume is too low for me.
does low volume matter when the spread is so low?
secondopinion
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Joined: Wed Dec 02, 2020 12:18 pm

Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by secondopinion »

chrisdds98 wrote: Wed Jun 28, 2023 10:46 am
bberris wrote: Wed Jun 28, 2023 8:42 am
Drew31 wrote: Sun May 28, 2023 12:41 pm Bumping this thread back as recently discovered the new(ish) BondBloxx Treasury ETFs.

https://bondbloxxetf.com/products/

Presently I have a rolling ladder of Individual Bills with no plans to spend it. It is essentially my break glass option in case of job loss.

XLF (6mo Treasury ETF) and XONE (1yr Treasury ETF) at ER's of .03% I have found very tempting to switch my ladder.

My pros for the ETF:
-Easier to add smaller amounts vs waiting to load up to buy a full $1,000 bond
-Slightly simpler to manage
-Easier on heirs should something happen to me
-Very low ER at .03 is essentially $3 per $10K.
-Don't have to wait for auctions, or pay spread on secondary market
-.01 spreads

My cons:
-New
-Low volume
-Still a cost vs free to buy myself
-If I desire to switch from rolling, to non-rolling at some point in future, I do risk NAV loss...though a lower concern with the <1yr durations.

I'm very, very tempted to switch so writing out my thoughts first and maybe others have recent experiences.
I think you mean XHLF, not XLF, a financial sector fund. Trading volume is too low for me.
does low volume matter when the spread is so low?
It can have a volatile spread if the volume is low; but given the underlying, it could be a source of major arbitrage if it ever went awry. Just place orders carefully, and you should be fine.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
bberris
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by bberris »

XHLF has heavy enough trading. I guess I was looking too early in the trading day.
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Drew31
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Drew31 »

daacrusher2001 wrote: Wed Jun 28, 2023 5:44 am Am I missing something important…various money market funds offer similar or better yields. Aside from possibly not being taxed by my state on the income from a T-Bill fund, what am I getting that makes one of these short duration funds better than a money market?
Much of this is being driven by the inverted yield curve at the moment. In a more normal yield curve environment, XHLF would yield more than a money market and XONE would yield more than XHLF. But now, you can (generally for the most part) get near the highest rates in a money market. What you would gain from these funds currently is the longer duration which be a benefit if short term rates went down where you'd see price appreciation in these funds and your money market would just see lower rates.
Looking4Answers
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Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by Looking4Answers »

I have been following this thread and have looked at some of the ETFs mentioned on various websites and brokerages. As Drew31 mentioned, the current interest rate environment is affecting the yield. Thus, it seems to me, when looking at returns,etc., the statistics (and ratings!) are practically useless.
daacrusher2001
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Joined: Sat Oct 24, 2015 11:42 am

Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by daacrusher2001 »

Drew31 wrote: Wed Jun 28, 2023 1:49 pm
daacrusher2001 wrote: Wed Jun 28, 2023 5:44 am Am I missing something important…various money market funds offer similar or better yields. Aside from possibly not being taxed by my state on the income from a T-Bill fund, what am I getting that makes one of these short duration funds better than a money market?
Much of this is being driven by the inverted yield curve at the moment. In a more normal yield curve environment, XHLF would yield more than a money market and XONE would yield more than XHLF. But now, you can (generally for the most part) get near the highest rates in a money market. What you would gain from these funds currently is the longer duration which be a benefit if short term rates went down where you'd see price appreciation in these funds and your money market would just see lower rates.
Honestly, these funds hardly seem worth it right now. I'm better off with cash/money market at the short end and just using BND for the longer term.

I have considered shifting to VG Intermediate Treasury as my long term bond holding tho' I don't feel an urgent need to make the switch. Maybe just for the part in taxable.
me8000
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Joined: Mon Jun 19, 2023 3:13 pm

Re: T-bills vs. T-bill ETF - seeking thoughts on pros and cons

Post by me8000 »

Is there a money market available from Fidelity that would beat USFR?
4.94% FIDELITY MMKT PREMIUM CLASS (FZDXX) 7-day yield @ 30-June-2023
5.15% USFR returned for June 2023
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