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Invest in These Cash-Like ETFs

Sanghamitra Saha

With the spread of coronavirus pandemic, the total number of confirmed cases globally topped 300,000 with more than 13,000 deaths. While the United States reported the third-highest toll of infected cases in the world, China and Italy occupied top two spots. Analysts anticipate the ‘worst’ financial crisis since 1929.

Deutsche Bank sees the world slipping into a coronavirus-fuelled recession in the first half of 2020. China’s economy is projected to contract 31.7% in the first quarter before rebounding sharply in the second.

Deutsche Bank forecast that the US economy would inch up 0.6% in the first quarter followed by a collapse of 12.9% in the second. Bank of America lowered global growth projections to zero, notifying that the world has already plunged into recession because of the coronavirus pandemic.

No wonder, the S&P 500, the Dow Jones and the Nasdaq composite added 15%, 17.3% and 12.6% last week, marking its worst week since 2008. This also boosted demand for cash holdings.

Why Hoarding Cash Makes Sense Now  

Investors sold their possessions to retain money in the wake of the unparalleled uncertainty caused by the virus pandemic. It’s more important to cover day-to-day expenses now, more so at the time of no work and lockdowns since “it’s a psychological thing where people continue to sell for cash,” per chief market strategist at financial services firm AxiCorp.

This is why money-market and government bond funds witnessed record inflows. Analysts believe cash and short-dated fixed income may play a greater role in providing stabilization to a portfolio. 

Below we highlight a few money-market ETFs and their performance plus yields.

PIMCO Enhanced Short Maturity Active Exchange-Traded Fund MINT

The 30-day SEC yield is 1.97% annually. Its estimated yield to maturity is 3.26% as of Mar 20. It has gained 0.2% in the past month (see all Money Market/Ultra-Short-Term ETFs here).

SPDR Bloomberg Barclays 1-3 Month T-Bill ETF BIL

The underlying Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade and have $250 million or more of outstanding face value. It yields 1.88% annually and added 0.1% in the past month.

iShares Short Treasury Bond ETF SHV

From May 1, 2020 onward, the fund will look to track a new underlying index, the ICE Short US Treasury Securities Index, and will cease to track the ICE U.S. Treasury Short Bond Index. Weighted Avg Maturity of the fund is 0.37 years. The fund yields 2.08% annually.

iShares Ultra Short-Term Bond ETF ICSH

Its effective duration is 0.46 years while the 30-day SEC yield is 1.93% annually. It has been down 2.9% in the past month (read: ETFs to the Rescue as Coronavirus Fears Beat US Stimulus Flows).

JPMorgan Ultra-Short Income ETF JPST

Its 30-day SEC yield is 1.83% while its duration is only 0.51 years and average life is 0.99 years. It has slipped 3% in the past month.

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iShares Short Treasury Bond ETF (SHV): ETF Research Reports
 
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL): ETF Research Reports
 
PIMCO Enhanced Short Maturity Active ETF (MINT): ETF Research Reports
 
iShares Ultra Short-Term Bond ETF (ICSH): ETF Research Reports
 
SPDR SSgA Ultra Short Term Bond ETF (ULST): ETF Research Reports
 
JPMorgan Ultra-Short Income ETF (JPST): ETF Research Reports
 
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Zacks Investment Research
 
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