Vanguard on Tuesday launched two fixed income index ETFs aimed at meeting investors' short-term liquidity needs — the Vanguard Ultra-Short Treasury ETF (VGUS) and Vanguard 0-3 Month Treasury Bill ETF (VBIL).
“These new ultra-short Treasury products serve as valuable tools for advisors and investors to build more precise and flexible portfolios, bridging the gap between money market funds and existing ultra-short-term bond offerings in the ETF wrapper,” said Sara Devereux, global head of Vanguard's fixed income group.
The new ETFs offer exposure to U.S. Treasury securities and have short durations and low volatility, Vanguard noted.
VGUS will track the Bloomberg Short Treasury Index, which includes U.S. Treasury bills, notes and bonds with less than 12 months until maturity, while the VBIL will track the Bloomberg U.S. Treasury Bills 0-3 Months Index.
Both ETFs will have an estimated 0.07% expense ratio, making them low-cost leaders, according to Vanguard.
"Neither of these ETFs is exactly innovative," Independent Vanguard Adviser editor Jeff DeMaso wrote in the newsletter, noting that the 0-3 Month Treasury Bill ETF "enters a crowded space," including the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) or iShares 0-3 Month Treasury Bond ETF (SGOV).
He also cited F/m Investments' U.S. Treasury 3 Month Bill ETF (TBIL), which holds the current 3-month Treasury bill, and WisdomTree’s Floating Rate Treasury ETF (USFR).
But the 0-3 Month Treasury Bill ETF "is a nice addition to Vanguard’s stable" because it offers an alternative to money market funds, "not that there’s anything at all wrong with Vanguard’s money market funds," DeMaso wrote.
While not a money market fund, and its price will fluctuate, the ETF could fill a similar role in portfolios, DeMaso said. It also undercuts the four competitors cited on expenses, he said.
The Ultra-Short Treasury ETF "might be a good spot to park cash you don’t need immediately but want to keep safe," but likely will be less popular than its T-Bill sibling, DeMaso added.
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