VanEck will release a US treasury bond exchange-traded fund (ETF) on the Australian market later this week offering access to an unhedged investment in short-term bonds.
The VanEck 1-3 Month US Treasury Bond ETF, which will be known as TBIL on the Australian Securities Exchange (ASX), will list on 18 May and consist of short-term US treasury bills that are high-quality AAA-rated securities and track the Bloomberg US Treasury Bills: 1-3 Months Unhedged AUD Index.
VanEck Asia-Pacific chief executive Arian Neiron said the new fund will be the first short-term US Treasury bond ETF of its kind listed on the ASX, but the 33rd ETF listed on the exchange by VanEck, and has been designed for Australian investors.
Neiron added the timing of the launch follows a jump in short-term treasury bond yields over the past year after a number of interest rate hikes by the Federal Reserve and yields should continue to rise while inflation remains high.
“As TBIL comes to market, short-term US treasury yields have surged to highs not seen for over a decade as the Fed has continued its unrelenting fight against inflation. That presents an attractive opportunity for Australian investors to target the high yields of short-dated US treasury securities given the RBA (Reserve Bank of Australia) cash rate is lower,” he said.
“For Australian investors, exposure to liquid US Treasury Securities offers investors a potential hedge against systemic or market episodes.
“With TBIL being Australian dollar unhedged and the Australian dollar considered as a ‘risk on’ currency, in times of uncertainty the Australian dollar has historically lost value relative to the US dollar. The US dollar exposure may provide capital appreciation during periods of economic weakness.
“TBIL’s launch is timely given the financial and political uncertainty the world faces. History has shown when confidence erodes, or when volatility spikes in financial markets, investors gravitate towards short-term US treasury bonds as a safe haven because they are considered a ‘risk-free’ asset as their payments are backed by the full support and credit of the US.”
