BTL: The Largest Money Market ETF

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The SPDR® Bloomberg 1-3 Month T-Bill ETF, launched on May 30, 2007, made its debut on the New York Stock Exchange's high-growth sector just days later, trading under the ticker symbol BILAs of June 17, 2022, this ETF had achieved a substantial size of $20.3 billion, with its issuer being State Street Global Advisors SPDR.

As we entered 2023, the SPDR® Bloomberg 1-3 Month T-Bill ETF experienced significant growthBy January 6, 2023, its assets had climbed to $26.709 billion, marking an increase of $6.409 billion within just six months, which translates to more than a 30% riseThis remarkable uptrend not only indicates the market's acknowledgment of the ETF's investment potential but also highlights a shift in investor preference towards short-term government bond investments amid the prevailing economic climate

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From a portfolio management perspective, it’s essential to note that this ETF tracks the Bloomberg U.S1-3 Month Treasury Bill Index, which accurately encompasses 19 different bondsThe SPDR® Bloomberg 1-3 Month T-Bill ETF employs a strategy of “perfectly” replicating the index’s constituents, ensuring a high degree of consistency between its portfolio and the index it followsThe top five holdings in the portfolio, with maturity dates staggered from February 2, 2023, to March 23, 2023, comprised treasury bills with respective market values of $2.519 billion and $1.918 billionTogether, these five bonds accounted for approximately 40% of the fund’s net assetsThis stable and diversified holding structure mitigates investment risks and reflects the ETF's adept positioning within the short-term treasury market.

As a money market ETF, the SPDR® Bloomberg 1-3 Month T-Bill ETF is characterized by relatively low volatility, with monthly fluctuations dipping as low as 0.01%. Even over the past 52 weeks, the total yield remained only 0.07%. Consequently, the daily trading volume for the SPDR® Bloomberg 1-3 Month T-Bill ETF has also remained minimal, with the past three months averaging only $6.48 million per day

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However, it’s essential to recognize that during periods surrounding the Federal Reserve's rate hikes, money market funds often witness considerable net inflowsFor example, after the Federal Open Market Committee announced a 75-basis point increase on September 21, 2022, a week later, the industry experienced a net outflow of $23.2 billion—except for money market funds, which attracted $7.2 billion in net inflowsNotably, the SPDR® Bloomberg 1-3 Month T-Bill ETF commanded the majority of these inflows, bringing in $2.3 billion, which constituted nearly one-third of all net inflows into money market funds.

The trend of significant net inflows into money market funds continued into the beginning of 2023. On January 6, the ETF focused on government debt saw a net infusion of $825 million, with the SPDR® Bloomberg 1-3 Month T-Bill ETF leading the pack by attracting $558 million

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In contrast, the iShares 20+ Year Treasury Bond ETF and iShares 3-7 Year Treasury Bond ETF captured net inflows of $351 million and $127 million, respectively.

On the holder side, money market funds are exceptionally favored by banks and large financial institutions due to their unmatched liquidity and substantial market scaleAs of May 31, 2022, prominent owners of the SPDR® Bloomberg 1-3 Month T-Bill ETF included renowned financial entities such as Bank of America, Morgan Stanley Investment Management, Richard Bernstein Advisors, and Upromise Investments.

According to the holdings report submitted by Bank of America to the U.SSecurities and Exchange Commission, by the end of the first quarter of 2022, the bank boasted an impressive total portfolio market value of approximately $10.3 trillion

During that quarter, the bank added 668 new stocks to its portfolio, increased its holdings in 3,582 stocks, decreased its holdings in 3,580 stocks, and completely sold out of 799 stocksNotably, the SPDR® Bloomberg 1-3 Month T-Bill ETF was one of the top five positions the bank reduced its stake in during that quarter.

Reflecting on the past year, 2022 was particularly challenging for the U.Scapital markets, primarily due to the Federal Reserve's continuous interest rate hikesDespite these hurdles, the ETF market maintained an expansion trajectory, with 430 new ETFs launched during the yearThis feat placed it just behind 2021’s record of 459 new ETF listings, with total capital raised exceeding $500 billionWhile the S&P 500 index only saw the energy sector thrive with a staggering 60% uptick, energy-focused ETFs performed exceptionally well

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