TUA ETF

On Tuesday, Simplify Asset Management unveiled the next addition to its bond ETF library: the Simplify National Muni Bond ETF (NMB).  Primarily, NMB seeks to provide income for its investors, and has a net expense ratio of 0.52%.

The Simplify Short-Term Treasury Futures Strategy ETF is a levered bet on lower short-term interest rates. In recent weeks, investor sentiment has once again swung in the direction of imminent rate cuts, boosting TUA's valuation. However, I believe the Fed may be more patient than pundits, as they may not want to repeat last year's mistake of loosening monetary policy prematurely.

The Simplify Short-Term Treasury Futures Strategy ETF is a levered bet on lower short-term interest rates. The TUA ETF may face headwinds as the American economy appears stronger than expected, potentially delaying or reducing interest rate cuts by the Federal Reserve. Since 2-year yields are closely tied to the Fed's monetary policies, if the Fed cuts less than 3 times, then 2-year yields may rise, pressuring the TUA ETF.

The TUA ETF is a leveraged bet on declining short-term interest rates. Expectations for the first rate cut have been pushed back, resulting in an increase in 2-year yields and losses for the TUA ETF. Despite the recent losses, investors should not bail on the TUA ETF as current 2-year yields now are consistent with the Fed's projections.

I covered TUA last April and a reader has asked for an update since interest rates are expected to decrease in 2024. TUA invests in short-term treasury futures. It aims for similar risk to medium-term treasuries, but with higher yields and returns. Although the fund has failed to live up to its potential in the past, the future looks rosier.

Simplify recently released a deep dive video, confirming my prior understanding of the fund. The Fed recently suggest peak short-term rates have been reached. Looking forward, TUA looks fairly priced in a 'soft landing' scenario. However, there is upside in a 'hard landing' scenario. Given attractive risk/rewards, I am raising the TUA to a buy.

In this week's edition of the ETF Issuer League, it's State Street that has taken a big leap forward. The megafirm's ETF AUM hit $1 trillion in total AUM via price and flows influence.