Beneficial Owners of U.S. Treasuries, their custodians and or their agent lenders.
What is U.S. Treasury Alpha PLUS?
U.S. Treasury Alpha PLUS is a process by which Beneficial Owners of U.S. Treasuries can generate yield enhancement through the exchange of one Treasury security for another Treasury security using SIFMA Master Repurchase Agreements, and or direct buys and sells with the Beneficial Owners counterparty.
Why use U.S. Treasury Alpha PLUS?
Beneficial Owners of U.S. Treasuries can add yield to their portfolio of U.S. Treasury holdings, when exchanging one U.S. Treasury for another U.S. Treasury security. At the time of each exchange the Beneficial Owner earns a fee. Based upon a constant weighted average maturity portfolio between 1-3 years with 100 exchanges, the expected yield enhancement could possibly range from 15 to 35 basis points.
What are some of the benefits captured by Beneficial Owners for using U.S. Treasury Alpha PLUS?
Beneficial Owner captures yield enhancement
Beneficial Owner is not required to make any new investment
Beneficial Owners liquidity position is unchanged
Beneficial Owner does not alter their investment strategy
Beneficial Owners custodian and or agent lender can execute all exchanges
Beneficial Owner does not pay any transaction costs
Beneficial Owner is not subject to cash collateral reinvestment risk
Beneficial Owner is not subject to counterparty default
Beneficial Owners continue to have the ability to trade specials
What is the cost to Beneficial Owners who decide to use U.S. Treasury Alpha PLUS?
To capture all the benefits which U.S. Treasury Alpha PLUS has to offer, the Beneficial Owner has to be indifferent to potentially having the maturity date of their securities be extended, or shortened by no more than 16 days (from the date of the original security). The possibility exists whereby the Beneficial Owner can get back to their original security, however, this cannot be guaranteed. The cost of a potential maturity differential is an opportunity cost believed to be valued at plus or minus 3 basis points. If the Beneficial Owner desires to exit U.S. Treasury Alpha PLUS, liquidate a position, and or the security matures, it will be the position which is currently being held by your custodian.
To learn more about U.S. Treasury Alpha PLUS please contact Lew Goldman at
firstname.lastname@example.org or call 516-223-3932.