BlackRock has launched a new exchange traded fund that holds ultra-short term U.S. Treasurys, the asset management giant said Thursday, in an effort to take advantage of the surging demand for bond ETFs amidst the market volatility brought on by the coronavirus pandemic.
The new fund, known as the iShares 0-3 Month Treasury Bond ETF, is passively managed and will track the ICE 0-3 Month US Treasury Securities Index. Its ticker symbol is SGOV and it started trading on the NYSE Arca.
With the launch, BlackRock is now offering 20 U.S. Treasury ETFs through iShares, including seven that track specific time intervals on the yield curve; one that invests in the entire yield curve; nine with maturities for specific years; two that track Treasury Inflation-Protected Securities; and one that tracks Floating Rate Notes. The U.S. Treasury ETFs, BlackRock said, have a combined $139.1 billion in assets under management as of May 18.
“iShares is committed to providing investors with the tools they need to build resilient bond portfolios, the importance of which has been reinforced as investors sought safe havens in recent volatile markets,” Steve Laipply, BlackRock’s U.S. head of iShares Fixed Income ETFs, said in a statement.
Laipply added that iShares’ short-term bond ETFs have experienced more than $26 billion worth of inflows. In outlining the new fund’s purpose for investors, Laipply said that it “offers precise exposure for increased stability, liquidity and cash management.”
Demand for bond ETFs has surged due to the COVID-19 related downturn, BlackRock said.
“Against the extraordinary backdrop of market turmoil driven by the COVID-19 crisis, a transformation has occurred in investor adoption of bond ETFs,” the company said in a statement introducing the new ETF. “While bond markets experienced unprecedented volatility, dislocation and challenges in liquidity, bond ETFs played an indispensable role in the markets.”
BlackRock added that during the first quarter bond ETF trading volume reached a new record of $1.3 trillion. In contrast, BlackRock noted, trading volume for all of 2019 was $2.3 trillion.
The new ETF has an expense ratio of 0.12%, but its net expense ratio is 0.07% due to a fee waiver in place through June 30, 2022. As of Wednesday, the ETF had an average yield to maturity of 0.16%, an average maturity of 0.10 years and a weighted average coupon of 1.03%.
iShares is a significant business line for BlackRock, which reports that it has $1.85 trillion in assets under management as of March 31, including more than $556 billion for bond ETFs. BlackRock’s overall reported AUM, also as of March 31, stands at $6.47 trillion.