Using Short-Term US Treasury ETFs as Collateral

In August 2022, CME Clearing announced it would accept short-term US Treasury ETFs as collateral, with a haircut schedule of 3% vs 30% for most other ETFs. 1,2 The SPDR® Bloomberg 1-3 Month Treasury Bill ETF (BIL) is one of five short-term US Treasury ETFs that is part of the program — and the largest of the five.3

Head of SPDR ETF Fixed Income

BIL Characteristics:

  • Yield to Maturity: 3.73%
  • Option Adjusted Duration: 0.14 years
  • Assets Under Management: $25.4B4

Who should consider BIL as a collateral instrument?

  • Current BIL owners or investors considering BIL
  • Investors with futures or other listed derivative positions at CME Clearing

What are the benefits of using BIL as collateral?

  • 3% haircut schedule for short-term US Treasury ETFs vs. 30% haircut schedule for other ETFs
  • Potential operational efficiencies for CME members
  • No need to roll Treasury bill positions

To use BIL as collateral at CME:

Contact your Futures Commission Merchant (FCM) or futures clearing broker. Note: CME positions are capped at $500 million across the clearing member and affiliates.

Growth of Fixed Income ETFs Continues

Analyzing the liquidity, trading volume, and underlying risk characteristics of the assets within the ETF itself spurred CME to accept short-term Treasury ETFs as collateral. In 2017, the National Association of Insurance Commissioners (NAIC) provided guidance for Systematic Valuation to allow insurers to treat certain fixed income ETFs as bonds rather than equities from a statutory accounting perspective.

Despite the fact that fixed income ETFs are equities, both the CME haircut on short-term Treasury ETFs and the NAIC designations for fixed income ETFs are more closely aligned with the underlying assets highlighting a more “bond like” treatment of fixed income ETFs. The ability to “look through” the ETF wrapper to the underlying holdings will contribute to the expansion of use cases for fixed income ETFs.

BIL Standard Performance as of September 30, 2022

BIL Standard Performance as of September 30, 2022

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