Lead-Lag Live

The New Cash Strategy: How TRSY Helps Investors Navigate Today’s Yield Landscape

• Michael A. Gayed, CFA

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Short term yields have shifted, liquidity matters more than ever, and investors are rethinking how to manage cash efficiently. In this Lead-Lag Deep Dive, Melanie Schaeffer sits down with Aram Babikian to break down the purpose of TRSY, why its structure is different from traditional cash vehicles, and how investors are using it in today’s rate environment.
They explore why liquidity, cost, and transparency are shaping cash decisions, how TRSY compares to CDs, money markets, and ultra short bond funds, and what its treasury-only structure means for both risk and potential tax advantages. Babikian also explains how the short duration profile, competitive expense ratio, and intraday tradability create flexibility for investors who need cash options without sacrificing yield.


In this episode:


• Why TRSY offers a different approach to short term cash management


• How intraday liquidity can help investors react to market volatility


• How expense ratios impact yield preservation in a higher rate world


• Key differences between TRSY, CDs, money markets, and ultra short bond funds


• The potential tax benefits tied to treasury backed income


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SPEAKER_00:

Really, the purpose of the X Tracker's ETF uh Treasury, which is low cost, it's liquid, and it's a way to earn competitive yields on US Treasury bills, which can make for a potentially compelling cash management tool, as well as a product that enables you to have options in a space where usually we think about CDs, money markets, or other ultra-short bond funds.

SPEAKER_01:

A fund designed to help investors manage cash efficiently in a shifting rate environment. Aram, let's start with the purpose of TRSY. For investors holding excess cash or short-term reserves, what problem does this ETF actually solve? And why is now a good time to be looking at TRSY?

SPEAKER_00:

The purpose of this product is, first of all, to bring something from a value standpoint. It is incredibly competitively priced at only six basis points. And really the purpose of the X Tracker's ETF uh Treasury, which is um it's low cost, it's liquid, and it's a way to earn competitive yields on US Treasury bills, um, which can make for a potentially compelling cash management tool, um, as well as a product that enables you to have options in a space where usually we think about CDs, money markets, or other ultra-short bond funds.

unknown:

Yeah.

SPEAKER_01:

So to get a little more into that, one of TRSY's biggest advantages, as you said, is liquidity. Uh CDs and other fixed-term instruments lock up capital. While TRSY trades intraday, how important is that flexibility in today's market?

SPEAKER_00:

In my opinion, I think it's very important, especially uh considering, like I said, where we are um in the cycle right now, and you have some volatility that you're seeing in the markets. Sometimes people want to raise cash to take advantage of certain situations. Very difficult to do with CDs. Uh, you do uh most of the time pay a penalty for early withdrawal, uh, depending on where you got that CD, they can be quite high in terms of the fees. But with uh TRSY, I mean, given the liquidity profile, not just for the fact that it is an ETF and trades throughout the day, just like any other ETF, but uh the underlying liquidity of TRSY is based off of treasuries, which are some of the most liquid instruments on earth, um, it creates a scenario where even the trading premiums are quite minimal when it comes to TRSY, potentially uh beating out any early withdrawal fees that you might see in CDs as well.

SPEAKER_01:

So to touch again on the cost, TRSY's expense ratio is so small, far below most money market funds or ultra short bond ETFs, how much of an advantage does that create for uh yield preservation?

SPEAKER_00:

A few things. So again, TRSY's uh net expense ratio is six basis points. Now, uh, when we were in the zero interest rate environment for quite some time, most of these money market funds um didn't charge a fee. And you couldn't because you were you weren't really getting much yield on it. Um but since that environment has shifted, there are some very popular money market funds that are charging over 30 basis points, some of them even as high as 42 basis points. And you know, uh on top of that, you have an instrument that uh, by its function and feature, has a stable NAV of one. Now that can be a good thing, and it could also be a bad thing, especially if there's room for appreciation, you're not necessarily going to get that in a stable vehicle, while in a product like TRSY, that air there is potential for appreciation, but obviously there's also potential for depreciation. With that being said, given the short time frame of zero to one year, your duration is quite muted. With that being said, also, um, money market funds actually don't just hold treasuries. Some of them can hold asset back securities, they can hold some other type of debt. So we are strictly sticking to treasuries, and that removes theoretically credit risk.

SPEAKER_01:

That's what I wanted to ask you about next. For uh investors who are comparing uh the different products, where does TRSY fit within the mix and how does its risk profile differ?

SPEAKER_00:

If you're looking at as a cash management tool or you're looking as maybe an income instrument, you're probably going to run up against some ultra-short bond funds. Now, those ultra-short bond funds will likely have a higher yield than TRSY, but that's also because of the holdings that they have. So again, you're introducing credit risk if you're going into corporate bonds or asset backed securities, and TRSY avoids that by strictly sticking to treasuries. Um, with that being said, some of these bond funds can also be quite expensive. Again, we're only charging six basis points here. Obviously, these are things that you want to always look at. But there's also another advantage to treasuries, and that comes down to the taxation. Of course, you want to always speak to your accountant regarding that, but especially if you're in a high-tax state, uh, being that these are treasuries, uh, there is the added benefit of no state income taxes on the income received from a product like TRSY because of its holdings and treasuries. While that might not necessarily be the case for an ultra short bond fund.

SPEAKER_01:

So, Aram, lastly, for investors and advisors who are interested in connecting further with you, uh, where can they go?

SPEAKER_00:

They can go on our website at xtrackers.com. And um, we do have many resources available. You can sign up to our newsletter, X Trackers Extra, and uh happy to uh speak further if uh the need does arise. I do believe that TRSY is a great product that combines liquidity, safety, cost efficiency, and potential tax advantages. And it can be at times a superior choice for modern cash management, especially compared to CDs, some money market funds, and ultra-short bond ETFs.

SPEAKER_01:

Thank you uh to everybody for watching here and thank you for joining uh today's lead leg deep dive, where we go beneath the surface of products and portfolios shaping global returns. Be sure to like, follow, and subscribe for more conversations like this.

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Michael A. Gayed, CFA

Host