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Posted: 10/28/2025 4:55:34 PM EDT
[Last Edit: 1168RGR][Edited]
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SGOV seems unique in that it is perfectly boring. While other short term bond funds are much more stable than stocks, they do meander and have hills and valleys. They react to economic events, and they have drawdowns. SGOV, on the other hand, is just a straight, slightly upward line no matter what happens, except for changing slope with interest rate. Like a high-yield savings account. Why? Can this be expected to always be this way? Seems unlikely, right? If so, why don’t other short/ultrashort bond funds like ULST, The above assumes reinvestment of interest. |
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I’m no economic genius, but… Sgov is apparently 0-3 month treasuries while the others invest into longer term bonds. They all say short term, but 6 months, 1 year, or 3 year are all short term when compared to 30 year bonds. So the sgov doesn’t have time to change price because it is constantly maturing and buying new bonds. The longer term funds hold bonds that change in market value when interest rates change. Ie. If you have a 3 year bond That pays 4% and interest rates drop to 3.5% then the market price of your bond increased because it pays 4% rather than 3.5%. This is why bond values tanked in 2022 - interest rates rose so fast that all the existing low rate bonds cratered because who wants to buy a 1% bond when you can go buy a 4% bond. Those 1% bonds we’re being outpaced by inflation, and people simply couldn’t get rid of them. |
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Thanks for helping me stumble along this headscratcher. That makes sense about the duration, so let’s look only at SGOV vs ULST. Average time to maturity for ULST is ~1.9 months; SGOV is 1.3 months. Those other two are longer, hence the exclusion…bad examples. All pics account for both interest reinvestment and expense ratio. What you’re saying makes sense, interest rate affects demand, which affects price. On the other side, supply/demand also affects price when dudes are panic selling/funding retirement/buying the dip seen here in 2020:  That’s a 6% ULST drawdown concurrent with a 27% drawdown of SP500. Here’s ULST vs SGOV in 3 time frames. SGOV isn’t very old, which I’ll talk about soon:    That 2022 dip in ULST is ~2.5%. At the far left of the first image, we see the recovery from the 2020 dip. We can see here that SGOV isn’t old enough to be impacted by the 2020 bond dip, and it was maybe too small for a selloff to affect it in 2022. With the rates vs inflation in that period, might as well buy booze and cigarettes, I guess. I looked through the order volume, and SGOV’s was very low until it’s ramped up in 2022. It was new in a time no one was into buying such an instrument, so there also wasn’t much in the wild to be sold. So that could explain why it wasn’t affected by 2022 bond dip. However, going forward from there, SGOV has about 10x the order volume of ULST. I would expect all that daily buying and selling to show up in the chart as more volatility. Yet, the opposite is what we see. That’s what I’m baffled about. |
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Just read the prospectus on those to see how they differ…. Sgov only holds treasury bills that mature in 3 months or less. Ulst holds some treasuries but also holds corporate bonds and the average time to maturity of bonds ulst holds is 0.8 years, or almost 10 months vs the 1.5 month average of sgov. You can easily buy treasury bills yourself. You avoid the fees of a fund and profit from treasury bills are exempt from state income tax also. Sgov wasn’t affected by the rapid rate increases starting in 2022 because it only holds treasuries that mature in 3 months or less. They were only ever 1 rate increase behind - their treasuries were maturing and being replaced with new treasury bills as fast as the rates rose. If you have a treasury bill that matures in 5-10-20 years then the lightning fast rate increases killed you. |
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Moderate-Length Barrel Evangelist
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I get it now. SGOV is not, in fact, unique. Like Morgan said, it’s the T-Bill that makes it the way it is, and there’s like a dozen of these ETFs. I didn’t realize that some of the ones I’d been looking at contained longer treasuries and corporates. Good learning journey, though. I took the above info, and read further about the nature of T-bills vs T bonds, then changed the keywords I was using to find comparable funds.  
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Originally Posted By 1168RGR: I get it In my mind seeking out fractionally higher returns via municipal/corporate bonds increases risk exponentially. As in you get an extra tenth or two return rate in exchange for 10-100x more risk. There’s a reason why the “risk free rate” is considered the treasury rate and all risk management uses that as the yardstick for comparison purposes. If you pay state income tax on profits and are investing taxable money then buying your own treasuries is probably the best bet since they are exempt from state income tax. |
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Originally Posted By Morgan321: the phrase “bonds” is very imprecise. Corporations declare bankruptcy and their bonds become worthless. There have been US cities that defaulted on their debts also. The only saving grace of treasuries is that if the fed .gov defaults then the entire economy is vaporized and money becomes worthless. In my mind seeking out fractionally higher returns via municipal/corporate bonds increases risk exponentially. As in you get an extra tenth or two return rate in exchange for 10-100x more risk. There’s a reason why the “risk free rate” is considered the treasury rate and all risk management uses that as the yardstick for comparison purposes. If you pay state income tax on profits and are investing taxable money then buying your own treasuries is probably the best bet since they are exempt from state income tax. Agreed. The risk/reward is not worth 1% more in interest for corporate bonds. Historically the differential was much greater and worth mixing into your ladder. The only thing I can figure is "too big to fail" gov bailouts and fed purchasing must be baked into the risk assessment cake now but that is a false security and doesn't mean bond holders won't get thrown under the bus in a serious recession or corporate mismanagement. I still remember how my Uncle got screwed on his GM bonds during their "restructuring" in the last recession. |
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Originally Posted By HEATSEAKER: Agreed. The risk/reward is not worth 1% more in interest for corporate bonds. Historically the differential was much greater and worth mixing into your ladder. The only thing I can figure is "too big to fail" gov bailouts and fed purchasing must be baked into the risk assessment cake now but that is a false security and doesn't mean bond holders won't get thrown under the bus in a serious recession or corporate mismanagement. I still remember how my Uncle got screwed on his GM bonds during their "restructuring" in the last recession. Originally Posted By HEATSEAKER: Agreed. The risk/reward is not worth 1% more in interest for corporate bonds. Historically the differential was much greater and worth mixing into your ladder. The only thing I can figure is "too big to fail" gov bailouts and fed purchasing must be baked into the risk assessment cake now but that is a false security and doesn't mean bond holders won't get thrown under the bus in a serious recession or corporate mismanagement. I still remember how my Uncle got screwed on his GM bonds during their "restructuring" in the last recession. There is no assurance that the Loans ..... will perform in accordance with the assumptions made and that revenues will be sufficient to pay debt service on the bonds when due. ...... The Authority has determine by resolution that the provisions of the law which requires the Governor to submit to the General Assembly the amount required to pay debt service on its bonds because insufficient moneys are available for such purposes shall not apply to the series 2024h bonds. In other words, it's a smoke and mirror scheme to redistribute money. It might collapse at any time and they simply decided that the state law that requires the Governor to report when the numbers don't add up doesn't apply, so they won't report when the numbers no longer add up. Anybody who invests in stuff like this is insane. Random bond funds are invested in stuff like this. You have zero recourse and all your principal will vaporize if Illinois lets "the authority" fail. |
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Yeah, in recent years some corporate bond funds have gotten absolutely hammered during drawdowns. I see no reason to buy a product that in a good year is only half as good as equities, and in a bad month still gets hammered. Originally Posted By brahm: i use a the fidelity money market, SGOV and FLDR as places to keep emergency funds. If I were keeping it all in one place and had full faith in my internet access, I’d probably use SGOV. |
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Originally Posted By Morgan321: As an exercise, I dug into a random municipal bond: The Illinois Housing Development Authority. To summarize, the "authority" is a board of politically appointed people who manage the "authority". They sell bonds to finance low cost, high density, and public housing as well as to back mortgages for poor people who don't qualify for a mortgage on their own. They have 368 employees to manage these functions. Direct quote from the bond details: In other words, it's a smoke and mirror scheme to redistribute money. It might collapse at any time and they simply decided that the state law that requires the Governor to report when the numbers don't add up doesn't apply, so they won't report when the numbers no longer add up. Anybody who invests in stuff like this is insane. Random bond funds are invested in stuff like this. You have zero recourse and all your principal will vaporize if Illinois lets "the authority" fail. |