Q: Recently I have found the TBIL and ZMMK ETFs to be a safe place to keep my cash and earn a half decent return.
However, the upcoming US elections, the upheaval in the Middle East, Ukraine, and the ongoing threat to global oil prices, is increasing the possibility of a sudden spike in interest rates, and a complete reversal of the current narrative of lower rates.
How would TBIL and ZMMK be affectted by such a turn of events (i.e. a spike in interest rates) and more generally, what investment asset classes would you recommend that would best mitigate such risks.
Thank You
John
However, the upcoming US elections, the upheaval in the Middle East, Ukraine, and the ongoing threat to global oil prices, is increasing the possibility of a sudden spike in interest rates, and a complete reversal of the current narrative of lower rates.
How would TBIL and ZMMK be affectted by such a turn of events (i.e. a spike in interest rates) and more generally, what investment asset classes would you recommend that would best mitigate such risks.
Thank You
John
5i Research Answer:
If rates spike, funds with short maturities (low duration) are the best hiding spots, with short maturities have the least sensitivity to rate movements in terms of asset prices. T-bill owns securities with terms of three months or less, so should see little material negative impact. But, as rates rise, its maturing securities will be rolled over to get higher rates, and yield should improve along with higher rates. The same should be true for ZMMK, which owns short term money market securities