00:00For something like T-bill, what is the main competition for this ETF?
00:04Where else could investors choose to get that same kind of exposure?
00:08Certainly plenty of ETFs that do short-term treasuries, but they don't really focus like T-bill does.
00:13T-bill looks to buy the on-the-run 90-day, hold on to it, and then opportunistically buy back
00:17into the 90-day.
00:19So you really have that exact spot on the yield curve, whereas many treasury ETFs will hold between zero and
00:24one year, zero and two years,
00:25or play around with other parts of the curve, which is fine, except when you see on Bloomberg that the
00:3090-day did something,
00:31you want to know that's what your ETF did. You don't get that elsewhere.
00:34And T-bill is cool because it has a lot of interesting things attached to it.
00:38You know, it's a fund that tracks 90-day treasury bills, as you say, which is, again, it's not too
00:44exciting in the realm of...
00:45Most exciting thing you've talked about in a long time, for sure.
00:48But, I mean, this is an ETF that you asked U.S. regulators for permission to record existing shares on
00:54a blockchain
00:54that was back in January a couple months ago, too.
00:58And then in February, you launched a mutual fund share class of this ETF.
01:04So you went the other way that we typically talk about.
01:06So it's interesting that this ETF in particular has become sort of a guinea pig for a lot of different
01:12interesting things.
01:14Well, I think it's because there's so much demand for T-bill and what it does.
01:17It does one thing. It does it well.
01:19We don't have to worry about 15 other things going right to try to achieve these other outcomes.
01:23And it's because investors asked for it.
01:25They said they wanted a mutual fund version, so we delivered.
01:28And folks have always been looking to move cash more efficiently in the digital economy.
01:32And T-bill is probably the easiest ETF way for them to do that.
01:35Can you do this, accomplish the same thing, get the same kind of demand for government security on another part
01:42of the yield curve?
01:43So we certainly have the rest of the yield curve.
01:45And X-bill, which is the six-month, has a lot of action.
01:48O-bill, which is the one-year, has some.
01:49Further out you go, they tend to get a little smaller other than U2 and U10, which are just such
01:53prominent parts of the curve.
01:55But they're all there. Folks come and go.
01:57Obviously, duration had been a hard trade for a while.
02:00Starting off in August 22, that probably wasn't the trade you wanted to make.
02:03So unsurprisingly, T-bill, with its very high yield, became very attractive.
02:07And I do want to talk a little bit about fixed income ETFs on a broader level as well, because
02:12you also have corporate bond ETFs, you have high yield ETFs.
02:16And to bring in a little bit of the conversation we were having with Bank of America Securities, it's interesting
02:20to think about how the trading of ETFs, the takeoff of fixed income ETFs, has interacted with and in some
02:28instances changed the underlying cash markets that they track.
02:32And, you know, you take a look at your product lineup. I wonder where that's been particularly true for you.
02:37Well, certainly, do-it-yourselfers have tried to build portfolios for a long time.
02:41That's easy enough at equities. It's much harder in bonds.
02:45Why?
02:45Well, bonds trade differently. They trade on yield versus price.
02:49And if you were to sit down to your terminal and say, what's the price of any equity today?
02:54There's a number.
02:55There's a much bigger swath of numbers to look at and dissect and do some math to try to figure
03:00out what is this worth today?
03:01So investors have stayed away from that.
03:03Also, you need a lot of counterparties to get good pricing, which most investors don't have access to.
03:07So now you've seen the ETF step in and make this possible.
03:10But practically, I think what you're realizing, most investors who buy ETFs, who are long-term investors, they like total
03:16return.
03:17They want to buy a ticker, set and forget, and come back and trade it.
03:20Whereas bonds over time will give you all your money back and you're sitting in cash.
03:23The ETF solves that for you.
03:25I am curious.
03:26I mean, you think about sort of the product proliferation and certainly we see a lot of, you know, kind
03:30of kooky ideas come through on the equity side.
03:33I'm worried where you're going with this.
03:34The elements that you just described, I mean, have sort of been a break check when it comes to what
03:39you're seeing on the fixed income product side.
03:41But I do wonder whether you think that we could enter into a future where you do see thematic fixed
03:46income ETFs start to become a thing.
03:50I think you will.
03:51I think T-Bill and some of the other products we offer and some competitive ones that have come out
03:54really show there's a need for clean beta in the ETF world.
03:58I mean, the ag is great.
03:59And buying AGG is...
04:01Eric might disagree, but he's not here.
04:02Well, he and I may agree that there are some improvements that should be made.
04:06And I think that's exactly why T-Bill and others are working.
04:08There are some improvements that could be made to fixed income indices.
04:12And all of the fixed income ETFs that are big and old and are letters we all know follow indices
04:17that are probably uninvestable, probably don't do what most investors think anyway.
04:22And most investors need something different.
04:24So T-Bill comes out, which gives you clean exposure.
04:27Some of our credit series does the same thing.
04:28But I think you're going to see much more thematic beta in fixed income as folks realize rates are not
04:34going to go to zero again, at least not in the foreseeable future.
04:36And they need a much more precise way to access their fixed income portfolio without owning 5,000 bonds.
04:43Speaking of the idea that rates are not going to go to zero anytime soon, at least not right away,
04:47we have an FOMC meeting this week.
04:49They start tomorrow.
04:50And, of course, they come out with their decision Wednesday.
04:52Where is the element of surprise going to be at this particular meeting, given that we now believe we can
04:58move forward with a Fed chair confirmation vote for Kevin Warsh?
05:04I think that's going to be the element of surprise.
05:05The first question is going to be to Jay Powell, are you staying or are you going, right?
05:09The clash song will be in the background as it's being asked.
05:13And fair enough.
05:13I think that we're not going to get an answer.
05:15Jay Powell is very good at not giving those answers.
05:19But I think we'll get a lot of information from how he answers the question and how did that meeting
05:24go and what are the governors thinking and what is he thinking.
05:27Practically, though, I don't think rates have a lot of room to go down right now, although they might reasonably
05:31go up.
05:32I don't think Jay Powell is going to deliver that as perhaps his legacy in his last meeting.
05:36So now it's really going to be all eyes on Jay Powell himself for the first time.
05:39Are you going to stick around and are we going to see Kevin Warsh or is there some more palace
05:43intrigue to play out?
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