When TreasurySpring was established, it was done so with a clear goal in mind; to bring the best in cash management to a much wider audience not just those large enough, with deep enough pockets, to access all the markets had to offer.
This led to the creation of three key pillars – bank debt, corporate debt and finally government debt. Given the world is the way it is right now, with uncertainty at every turn, we are seeing more corporates look to this ‘uber safe’ pillar. During my recent trip to the U.S., the topic of U.S. Treasury Bills and how to access them was often on top of the agenda. The conclusion: not easily, until now.
But, what exactly is this pillar all about and why is it so safe? And, importantly, how does an FTF deliver it in a better way?
Why is it so safe?
Our Government pillar enables business to gain direct exposure to Govt risk, in the form of T-Bills. U.S. T-Bills are U.S. Government debt obligations, backed by the treasury department, with a maturity of 1 year or less – in the below I will talk with a U.S. context but the same holds true in the UK (UK T-bills are the UK equivalent).
Often considered a proxy for a risk-free rate, these short-term investments offer a way to manage cash with the assurance they are backed by the “full faith and credit” of the U.S. Government. In their near 250 year history, the U.S. Treasury has never failed to pay back its lenders.
There can be many reasons why clients want to access US T-Bills; they may have just raised money via a bond that takes them over counterparty limits, they may hold cash for a specific obligation or there may be specific covenants in financing agreements that dictates they must use the risk-free rate – the list goes on.
However, doing so is not straight forward.
One way in which investors can gain indirect exposure to U.S. T-Bills is through a U.S. Govt. Money Market Fund. These maturity-transformed mutual funds allow businesses to place cash in a pooled vehicle, with only exposure to the U.S. Govt. They are popular – in the US, the Govt. MMF sector increased by $47.5bn to $4.63trn in early November 2022.
However, as these provide same day liquidity, a business that has cash which they can term out for 1, 2, 3+ months is paying a premium for liquidity that they do not need.
How does the FTF deliver a better way?
A more effective way than govt. MMFs for a business to manage sizeable cash balances with the risk-free rate is by purchasing T-Bills directly. How do they do it? In short; it is complicated, cumbersome and with high entry barriers. You would need to find a dealer and appoint a custodian – neither of which come cheap. You would also need to manage settlements and trading directly, which can be complicated. There are systems, such as TreasuryDirect – however, these are often aimed at a retail audience and prove challenging to use with antiquated technology.
At TreasurySpring, we have the infrastructure to connect our clients with U.S. T-Bills – we have established the necessary dealer and custodian relationships, giving us full market access, building the pipelines to purchase these investments with a click of a button. Clients don’t need to worry about anything other than choosing their T-Bill – meaning they have more time to focus on other things.
The FTF wraps around the investment, giving clients 100% look through exposure to their selected tenor. Now, via one log on clients can see U.S.T-Bills with a variety of tenors (as of today, we have 42 different tenors), so there are multiple different homes they can use.
There has never been an easier way to access T-Bills; onboarding is simple, executing is simple and the result is the ultimate risk-off approach.