ETFs seek to provide monthly income guaranteed by the government
Horizons ETFs has launched Canada’s first ultra short-term Canadian and U.S. T-Bill ETFs with the Horizons 0-3 Month T-Bill ETF and the Horizons 0-3 Month U.S. T-Bill ETF.
CBIL and UBIL.U are the first ETFs in Canada that offer exposure to short-term federal Treasury Bills, securities issued by their respective governments with maturities of one year or less.
T-Bills are among the lowest-risk assets accessible to investors throughout the fixed-income spectrum since they are short-term securities guaranteed by the creditworthiness of sizable federal governments, according to the press release. Every month, the ETFs will provide unitholders a portion of the net income they receive from their T-Bill holdings. The ETFs should provide interest income as a result that is comparable to the yield on each of their short-term T-Bills.
"During volatile markets, factors like credit risk and term-to-maturity can be crucial considerations when building a resilient portfolio," said Jasmit Bhandal, Interim President and CEO of Horizons ETFs. "Short-term treasuries, like the ones held in CBIL and UBIL.U, can offer investors consistent monthly income, backed by the creditworthiness of the Canadian and U.S. federal governments."
Although T-Bills are accessible for public purchase, direct investing may result in extra expenses and management. Since they handle these operations while keeping their respective maturity exposures between 0 and 3 months, ETFs like CBIL and UBIL.U do not require manual administration.
Compared to conventional savings instruments like GICs or High-Interest Savings Accounts, which sometimes have minimum holding periods or investment quantities, CBIL and UBIL.U are ETFs that offer a yield equivalent to that of T-Bills. The first goal annualized net yield at launch for CBIL is anticipated to be 4.23%, while the initial target yield for UBIL.U is projected to be 4.25%.
CBIL and UBIL.U can both be bought or sold at any time throughout the trading day, and both offer a comparable yield. T-Bills are backed by the governments of Canada and the United States, but CBIL and UBIL.U are not guaranteed by the Canada Deposit Insurance Corporation or the Federal Deposit Insurance Corporation in the United States.
Neither has ever missed a loan payment. UBIL.U exclusively accepts U.S. dollars, whereas CBIL accepts Canadian dollars.
"Increasingly, investors are seeking ways to hold cash in their portfolio, while taking advantage of higher interest rates to generate higher levels of income.,” said Bhandal. "In our view, CBIL and UBIL.U provide exposure to very low-risk assets that provide investors with viable Canadian and U.S. dollar cash alternatives that offer both safety and an attractive monthly income."
The ETFs' units will start trading on the Toronto Stock Exchange today after finishing their initial sale of units to their approved broker.
