Which acts in favor of investing in GSECs, not overhyped.
…and in the near short-term, after a bounce-back,
they will divest themselves off-of the riskier instruments (at a profit).
Note: Assumption based on historical pattern that repeats each time during a significant equity market draw-down.
AFAIK, one cannot buy delivery orders using these as collateral.
So, cannot invest in them to later snipe GSECs/SDLs at a discount.
What’s the added risk here? Volatility from time to time?
Only a relevant factor if one does NOT intend to hold till maturity.
The other way to look at it is,
if one doesn’t need the liquidity, i.e. capital preservation in the long-term,
then those additional percentage points of returns are available.
Also, it is not 1-2% additional returns over Overnight/TREPS.
Purchasing TBills/GSECs/SDLs at steep discounts 5-20% over their face-value, offers 10-12% annualized returns.