After a few years of enjoying eye-catching interest rates on CDs, money markets, and high-yield savings accounts, investors who like to stash some cash need to confront the reality that those previously impressive yields will decline as the Fed lowers interest rates.
Currently, the average high-yield savings account yields between 4.20% and 4.30%. And some financial institutions offer more. But investors can do even better with the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI).
Home to $677.55 million in assets, CSHI turned three years old in August. That makes it one of the seasoned veterans of the NEOS stable of income-generating ETFs. Arguably, CSHI was one of the most well-timed new ETFs that came to market in 2022. But the fund remains highly relevant today. Fed easing and a distribution rate of 5.12% confirm as much.
Making Cash Attractive Again With CSHI
Gold is rallying to all-times, stocks are flourishing, and bonds are expected to command tailwinds courtesy of the Fed. So some investors may think it’s a good idea to remain fully invested. However, recent price action in the cryptocurrency and equity markets confirm it’s often a good idea for investors to keep some powder dry. That’s so they have the capital needed to buy on dips.
That speaks to the utility of maintaining even small positions in CSHI. Investors capture reward in the form of the ETF’s stout yield for exercising prudence. Plus, the NEOS ETF could be primed for growth as investors look to maintain decent yields on cash as the Fed lowers rates.
“There is over $7 trillion in cash-equivalent investments that have offered an attractive return for no market [risk. Much of that money is institutional or emergency funds savings. But] some shift out of cash-equivalent assets can be expected as the Fed begins to cut rates,” reported Eric Rosenbaum for CNBC.
To be precise, there was $7.18 trillion stashed in money market funds at the end of 2024. That’s a massive number. And there’s potential for some of it to move elsewhere as rates decline. CSHI could be compelling on that front. That’s because there’s more to the ETF’s story than exposure to one- to three-month T-bills.
Due to the short durations and high credit quality of those bonds, they typically don’t yield much. But CSHI enhances the income proposition on one- to three-month T-bills by employing a unique put-focused options strategy that includes selling S&P 500 puts.
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