(Bloomberg) -- CME Group Inc. delivered another win to the booming $1.3 trillion bond exchange-traded fund market.
The derivatives exchange operator’s clearing unit will accept a handful of short-dated Treasury ETFs to meet initial margin requirements, according to a statement Tuesday. Five funds including the $18 billion SPDR Bloomberg 1-3 Month T-Bill ETF (ticker BIL) qualify, CME said separately.
It’s a boon for a quickly growing corner of the $6.6 trillion ETF market, which has long been dominated by index-hugging equity funds. Assets in bond ETFs have ballooned in recent years as institutions and professional money managers warm up to the structure, a trend which was accelerated by the Federal Reserve’s surprise decision to buy credit funds at the height of the pandemic market turmoil in March 2020. CME’s decision to allow debt ETFs as collateral further knits the products into Wall Street’s wiring, industry experts say.
“Overall, it’s another use case for ETFs, besides long-term investing, tactical directional bets, and hedging,” Strategas Securities ETF strategist Todd Sohn said. “Using ETFs just makes this so much more streamlined and efficient.”
Adding short-dated Treasury ETFs to the roster of allowed collateral should provide “greater flexibility and increased efficiency in managing collateral costs,” CME said in Tuesday’s release. Unlike actual Treasuries -- the proceeds of which must be re-invested after the securities mature -- debt ETFs hold a constant maturity and thus don’t need to have the exposure rolled forward, which is more “operationally efficient,” CME said.
The CME’s decision comes months after the New York Department of Financial Services said it would allow insurance companies to classify fixed-income ETFs as individual bonds rather than equities for capital requirements purposes -- a catalyst cited by BlackRock Inc. in their forecast for global bond ETF assets to reach $5 trillion by 2030.
“Much like recent wins in the insurance side of things, this increases the use cases for fixed-income ETFs with institutions,” said Dave Nadig, financial futurist at data provider and research consultants VettaFi. “It won’t mean billions overnight or anything, but it makes these funds specifically much more utile.”
Of course, it remains to be seen how robust demand will be to use bond ETFs as collateral, according to Kevin McPartland of Coalition Greenwich. But the decision signals how important ETFs have become to the functioning of bond markets, he said.
“The next question will be how or if this offering is utilized by clearing brokers, or do they largely still stick to the status quo of collateral posting,” said McPartland, the firm’s head of market-structure research. “This is another signal that fixed-income ETFs are cemented as a huge part of the fixed-income market.”
This means, you take one article, and you use the article distribution system. It will generate thousands of unique versions of your article, and publish those unique articles to hundreds of websites that are related to your niche.
Take a look at our comprehensive guide to the best and most popular information ebooks and products available today on Detoxing, Colon Cleansing, Weight Loss and Dating and Romance. They are all in one spot, easy to find and compere to make a quick selection for the product that best fits your needs or wants.
So browse through a category and make your preferred selection and come back here to read more choice articles and get a few more helpful tips on ways to help your enhancement.
As an Amazon Associate I earn from qualifying purchases. “saubiosaubiosuccess.com is a participant in third party affiliate and advertising programs; The Amazon Services LLC Associates Program, Awin network, and other affiliate advertising programs are designed to provide a means for sites to earn advertising fees and commissions by advertising and linking to products on other sites and on Amazon.com. Amazon and the Amazon logo are trademarks of Amazon.com, Inc, or its affiliates.”
We use anonymous cookies and various 3rd-party services to optimise and to offer you a better, more personalised, browsing experience with advanced accessibility enhancements.
Dismiss
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
