Cash-Like ETFs Lure Billions as Traders Shelter From Volatility

(Bloomberg) — Rising cross-asset volatility in August has sent investors piling into cash-like ETFs at the fastest clip in months.

Traders have poured $7 billion into ultra-short bond exchange-traded funds this month, according to data compiled by Bloomberg Intelligence. More than $2 billion of that went to the SPDR Bloomberg 1-3 Month T-Bill ETF (ticker BIL), reversing four months of outflows.

ETFs that hold short-term debt paying north of 5% have offered traders refuge from both stock and bond volatility. Although Treasury yields have pulled back in recent days, they hit the highest since 2007 in August amid concerns over continued hawkish monetary policy and a surge in supply. That in turn put downward pressure on stocks.

August is now on pace to to be the best month of inflows for cash-like bond ETFs since February. The S&P 500 is also on pace for its first monthly drop since February.

“We had the first material equity drawdown since SVB which I think spooked investors,” said Komson Silapachai, a partner at Sage Advisory. “Couple that with the fact that longer-term bonds sold off, I could see flows both from equities and longer-maturity bonds flowing into BIL and other similar funds.”

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