Replicate 6 months T-bills with ETFs

[moneybagz]

I'm looking for ETF's that replicate 6 month treasury bills. I've got a list of possibilities here, but as I have limited knowledge of bonds, could somebody recommend an ETF or a combination. I don't mind some exposure to USD.

IB01 iShares $ Treasury Bond 0-1yr UCITS ETF USD Acc
BBIL JPM Betabuilders US Treasury Bond 0-1yr UCITS ETF USD Acc
BBLL JPM Betabuilders US Treasury Bond 0-1yr UCITS ETF GBP Acc
BBM3 JPM Betabuilders US Treasury Bond 0-3 Months UCITS ETF USD Acc (GBP)
BB3M JPM Betabuilders US Treasury Bond 0-3 Months UCITS ETF USD Acc (USD)
ZPR1 SPDR Bloomberg 1-3 Month T-Bill UCITS ETF USD Unhedged Acc
TBIL SPDR Bloomberg 1-3 Month T-Bill UCITS ETF USD Unhedged Acc
VDST Vanguard US Treasury 0-1 Year Bond UCITS ETF USD Acc
XT0D Xtrackers US Treasuries Ultrashort Bond UCITS ETF 1C USD
XT01 Xtrackers US Treasuries Ultrashort Bond UCITS ETF 1C GBP

Many Thanks

[air04]

I am sure others will add to this.

Firstly, why do you not buy T-bills directly, once you open an account with brokers like interactive brokers, you can buy them. The cost of buying and currency exchange is extremely low in IB. They have SIPP/ISA too, but not sure what all is allowed in ISA/SIPP. I have bought treasuries in their direct account.

Most ETFs do not have a maturity date(there are exceptions like https://www.thebalancemoney.com/target- ... ing-416964), not many options of target maturity etfs/funds. These will give far better replication.

ETFs generally can not replicate Tbills/gilts, as they try to keep Weighted Average Maturity close to what they have decided. If you can find a target maturity fund/etf that can be good enough for you, that should replicate closely.

Good Luck,
ap

[moneybagz]

Thanks for the advice. I forgot to add that the bonds will be within a SIPP (ajbell). I do have an interactive brokers account but unfortunately no spare money to trade in there. I don't fancy moving my SIPP over at the moment so looks like I'm stuck with ETF's

[air04]

I use A J Bell too. I just called them, and they said they can buy treasuries generally. Best is to send the treasuries you want to buy to "Dealing services: dealingservices@ajbell.co.uk" and they can confirm.

But keep it in mind, they change forex charges https://www.ajbell.co.uk/sipp/charges-a ... cy%20funds

Also, there are money market funds that may help.

Good luck,

[moneybagz]

Thanks ap, appreciated

[moneybagz]

Good point on the forex charges. I'd be paying 0.75% on each transaction and if I build a ladder of short term T-bills I'd be paying a substantial amount in charges each year. Maybe the ETF would work better with just one foreign exchange fee.

[air04]

Good point on the forex charges. I'd be paying 0.75% on each transaction and if I build a ladder of short term T-bills I'd be paying a substantial amount in charges each year. Maybe the ETF would work better with just one foreign exchange fee.

Many ETFs are listed in UK LSE and are in GBP(though they track USD), so no forex fees to pay. And there are hedged ones, they are different.

As an example,
https://www.ajbell.co.uk/market-research/LSE:TREL
https://www.ajbell.co.uk/market-research/LSE:TRLX

both are the same product, unhedged. Then you will save the forex fees.

[Aminatidi]

I never quite figured out what I'm missing with just going out and buying something like this.

https://etf.invesco.com/gb/institutiona ... nformation

[air04]

I never quite figured out what I'm missing with just going out and buying something like this.

https://etf.invesco.com/gb/institutiona ... nformation

If you buy a 6m treasury and keep to maturity, you know exactly all cash flows (you know when and how much interest you will get, and what is the final maturity value).

If you buy an ETF, as the etf has no end/maturity date, you are holding treasuries with similar duration at maturity as you were when you invested. So, you are not sure what returns you will get on your investment.

In the link you shared, go to the performance tab, click 1Y at the bottom. Check the TR (total return) value on March 31 20222 and Sept 30( 6 months). Basically, there is no profit and there is a small loss. That could not have happened if you bought real treasuries on March 31st, as it had positive yield https://uk.investing.com/rates-bonds/uk ... bond-yield The reason for the loss in the ETF is because the YTM for 6m went up from March 31-Sept30, and so the prices of treasuries in the ETF fell to compensate for it.