Cash ETF offers 3.23% yield amid cooler June CPI

The U.S. Consumer Price Index rose 3.5% year-over-year in June, down from 4.2% in May. The core CPI, which excludes food and energy, increased to 2.9%.

Those readings have reduced market expectations for near-term Federal Reserve rate cuts. Market participants currently anticipate the Fed will hold policy steady at its July meeting.

The NEOS Enhanced Income 1-3 Month T-Bill ETF, ticker CSHI, held about $1.45 billion in assets under management. The fund reports a 30-day SEC yield of 3.23% and a published distribution rate of 4.71%.

CSHI invests in Treasury bills with maturities of one to three months and applies an options overlay on the S&P 500 Index. The fund generates option premium by selling call options on the index, which supplements income from the bills.

The options overlay reduces upside participation in equity gains when the market climbs. The short maturities of the bill holdings limit the fund’s sensitivity to changes in interest rates compared with longer-duration bond funds.

Nigel Green, CEO of the deVere Group, observed that the Federal Reserve places significant weight on core inflation and that the measure has been trending higher; he noted that a hold or a hike appears more likely than an early cut. He also referenced a resilient labor market and steady growth as factors affecting policy timing.

The ETF is positioned as an alternative to traditional cash and money market holdings for investors seeking income while maintaining short duration. Potential investors should note that option premiums and bill yields will determine the fund’s future performance, and the strategy does not eliminate risk.

Treasury bills with one- to three-month maturities carry minimal credit risk and mature quickly. Adding index options aims to increase the income generated from modest bill yields.