Hi all,
I am a European investor with USD to invest. I am seriously debating between buying t-bills on the secondary market vs. treasury ETFs (0-1 year duration) vs. Floating Rates.
Benefits of T-Bills vs ETFs:
- No bid-ask spread (TFRN - the LSE trading version of USFR has a spread of 0.2%. USFR on the NYSE only has a 0.02% spread)
- Low purchasing cost on the brokerage vs an ETF (0.002% vs 0.05%)
- No NAV fluctuation unlike treasury ETFs
- The calculated yield on purchase is definite. Not the case for ETFs.
- No expense ratio
- Has an historically higher yield than ETFs counterparts (yet USFR seems to have a performance that is very close)
However the biggest con to me is that it is incredibly more manual (need to roll them over when they mature if I make a ladder) and any lost days when uninvested is lost interest so all the above pros could be erased when considering this possibility.
Now when it comes to rates scenarios:
- if rates go down - you have an advantage holding t bills as your yield is locked in on purchase
- if rates go up - USFR/TFRN has a large advantage as they can react to rising interest rates in a week.
As the FED plans to increase their rates twice in 2023 - would you say the best would be to go USFR/TFRN? TFRN in Europe only has 120M in assets (new product and in USD not EUR hence the much lower volume vs US counterpart). Is it an issue? Is the product exactly the same as USFR? https://finance.yahoo.com/quote/TFRN.L/
What would you advise me to do? I don't need the money for at least a year, but I might need some of it before 5 years. It's currently yielding 4.19% on Interactive Brokers cash balance. If the stock market crashes I will invest some of it but for now I am very happy with the 4-5% safe yield on cash.
Submitted July 06, 2023 at 05:27AM by helloyouahead https://ift.tt/Pv3NKum
