There is A Weekly Income T-Bill ETF That No One Knows About, But It’s Beating Money Markets

I don’t know about you, but I’m really not the biggest fan of TreasuryDirect. Sure, you can build a T-bill ladder on there, but you have to be willing to wade through a pretty clunky, outdated interface.  And I’m not the only one who thinks that. Funny enough, if you look it up, TreasuryDirect has 116 Yelp reviews and sits at a whopping 1.3-star rating out of five.

So what do most investors do instead? They default to money market funds. The fixed $1 net asset value (NAV) sounds appealing, and they’re easy to buy and hold in a brokerage account. But honestly, I’m not that impressed because a lot of these funds are fairly expensive for what they do.

Take the Fidelity Money Market Fund (SPRXX), for example. It currently pays a 3.37% seven-day SEC yield. That’s noticeably below the current Fed funds rate of around 3.5% to 3.75%, and a big reason for that gap is the now fairly high 0.42% expense ratio.

If you want the safety of Treasury bills but with a more hands-off structure, lower costs, and even the bonus of weekly instead of monthly payouts, there’s a lesser-known ETF worth looking at. It’s still relatively small at about $153 million in assets under management, but it offers a surprisingly compelling alternative.

A weekly paying T-bill ETF

Most investors are used to income funds that pay monthly. The Roundhill Weekly T-Bill ETF (BATS: WEEK) is different. As the name suggests, it goes ex-distribution every single week and pays out shortly after.

For example, in March, the fund had a declaration date of March 23, an ex-distribution date of March 24, and a pay date of March 25. That frequency alone can make it particularly appealing for investors looking for more consistent cash flow.

Under the hood, WEEK is fairly simple. It’s an actively managed portfolio of Treasury bills. You can think of it as a T-bill ladder packaged inside an ETF. As each rung of the ladder matures, the accrued interest are paid out, and the principal is reinvested into new T-bills to maintain the ladder.

While the net asset value per share isn’t fixed at $1 like a money market fund, in practice it’s quite stable.  The ETF tends to follow a sawtooth pattern around $100. Over the course of the week, the NAV gradually creeps higher as interest accrues. Then on the ex-distribution date, it drops back down as the payout is distributed, and the cycle repeats.

Cost is another advantage. Compared to the Fidelity money market fund mentioned earlier, WEEK charges just 0.19%, less than half the expense ratio. That lower fee helps support a more competitive yield, currently around a 3.42% 30-day SEC yield.

How to use WEEK in a portfolio

In terms of use cases, WEEK is surprisingly versatile. If you follow something like Warren Buffett’s allocation of 90% in an S&P 500 index fund and 10% in short-term Treasuries, WEEK can serve that Treasury sleeve well. It offers capital preservation with income tied to prevailing rates, and you get paid weekly instead of monthly.

It can also function as a replacement for a high-yield savings account. While it’s not FDIC-insured and the NAV isn’t fixed, it remains relatively stable, and the underlying assets are Treasury bills backed by the full faith and credit of the U.S. government. As an added bonus, the income is exempt from state income taxes.

Either way you look at it, WEEK is a flexible cash management tool. It also highlights why it can pay to look beyond the largest ETF issuers like Vanguard, State Street, BlackRock, Schwab, and Invesco. There are smaller, more niche products out there that can offer very practical advantages.