On Monday, August 17, 30-year Treasury yields hit 5.31%, the highest level in 19 years for long-dated U.S. government bonds. That move has plenty of traders and fixed income investors on edge, because 19 years ago was shortly before the start of the global financial crisis.

The 30-year’s recent surge doesn’t necessarily mean another economic calamity is imminent. However, it is confirmation that 30-year Treasury prices are faltering (bond prices and yields move inversely). Theories abound as to why that’s the case, including some belief that some global investors aren’t enthusiastic about U.S. government bonds due to excessive debt levels in this country.

Bond market jitters could compel some market participants to flee to cash, but astute investors can do better, thanks to the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI). CSHI, which has been a hit with cash alternative-seeking advisors and investors this year, taps the relative safety of 1-3 month T-Bills and juices the income proposition with an S&P 500 options overlay. The result is a 30-day SEC yield of 3.25%, which is compelling when considering CSHI’s lack of duration risk.

CSHI May Be Right for This Bond Market

Of course, there are risks in holding too much cash. But with CSHI’s livelier income stream, the ETF may be appropriate for a broad swath of investors today.

“Due to its lower return potential, the role of cash and cash-equivalent investments can be easily undervalued by investors,” noted Ameriprise Financial. “However, this asset class plays a critical — and practical — function in a well-rounded portfolio. It can help you meet short-term liquidity needs, offer more stability during periods of market volatility and provide a degree of risk management.”

CSHI’s T-Bill component may be appealing to risk-averse fixed income investors over the near-term. After all, new Federal Reserve Chairman Kevin Warsh is playing things close to his vest. So far, he has provided no clues about the central bank’s interest rate intentions.

However, many market observers believe that Warsh is an inflation hawk. Plus, at least three Fed members want to see rates rise in an effort to head-off inflation. Higher rates would be punitive to longer-dated bonds, but CSHI can defray some of that risk.

T-Bills are “short-term debt obligations are backed by the U.S. government and have a maturity that can range from only a few days to one year,” added Ameriprise. “Since they’re considered a low-risk investment, interest earned can sometimes be lower compared to the overall market.”

Fortunately, CSHI enhances the low interest side of the T-Bill coin.

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