The Federal Reserve has raised interest rates 10 times since March 2022 to fight rising inflation rapidly, writes Solactive. This movement has led money market instruments to yield higher returns than some alternative investment options. In light of this landscape, there has been a noticeable increase in investor interest in allocating resources into less risky market segments, i.e. short-term fixed-income products. To tap into this potential, Global X ETFs has launched the Global X 1-3 Month T-Bill ETF, tracking the Solactive 1-3 month US T-Bill Index and offering investors a chance to diversify their portfolio within the fixed-income space.
The Solactive 1-3 month US T-Bill Index is designed to reflect the performance of USD-denominated T-bills (1-3 months) issued by the US government. It operates on a rule-based, market-value-weighted system. The new ETF tracking the index is listed on June 20 on the NYSE under the ticker CLIP.
This launch follows the US central bank’s several rate hikes since March 2022, implemented to manage inflation effectively. Recently, the Fed announced its decision to hold its benchmark rate target at 5 per cent -5.25 per cent to assess the impact of the increases. Due to their shorter maturity periods, short-term bonds are generally less affected by interest rate fluctuations compared to long-term bonds, reducing investors’ exposure to interest rate risk and offering a potentially higher return on investment than the long-term counterparties.
Timo Pfeiffer, CMO of Solactive, says: “We are very pleased that Global X ETFs has chosen Solactive to launch this ETF, which tracks our index focusing on short-term bonds. This emphasis aligns with the current economic climate and the potential for further interest rate hikes, mitigating investors’ exposure to interest rate risk. Our collaboration with Global X ETFs underscores Solactive’s commitment to growing in the fixed-income space, and we’re excited about the prospects this partnership brings.”