Clients make a dash for cash ETF
Someone call Ray Dalio: Clients are feeling less stupid about owning cash.
The SPDR Bloomberg Barclays 1-3 Month T-Bill ETF took in $580 million last week, tops among U.S. fixed-income products.
During an interview in Davos last month, Dalio, the Bridgewater Associates founder said, “It feels stupid to own cash in this kind of environment. It’s going to be great for earnings and great for stimulation of growth,” but terrible for bonds.
Since that time, BIL — whose holdings are cash equivalents — has outperformed the S&P 500 Index and iShares 20+ Year Treasury Bond ETF by more than 3.5 percentage points.
BIL was an outlier among U.S.-listed fixed-income products, which suffered net outflows of nearly $1.2 billion last week. Its newfound appeal may be linked to its dividend yield, which has jumped to its highest level since 2008 amid heavy supply and continued gradual tightening anticipated from the Federal Reserve. As bond trader Ed Bradford put it in late January, “why are people hating on cash just as it starts to yield something?”
Last week’s haul marks the largest inflow for this fund since August 2015, when China’s shock devaluation of the yuan fueled a simultaneous selloff in stocks as well as longer-dated Treasuries. Increased appetite for short-term U.S. debt comes at just the right time: ahead of record issuance of three- and six-month bills by the Treasury this week.