Optimizing Short-Term T-Bill Yields With Real-Time, Real World Data.

Tokenized Treasury funds are tokenized investment funds that primarily hold short-duration U.S. Treasury Bills and U.S. Agency securities. These funds aim to provide yield-bearing, low-risk returns for institutional investors. By bringing these funds onchain with programmable oracles, their tokenized structure allows for programmable features via smart contracts, enabling automated responses based on IRL and real-time events. Portfolio optimization in this context involves adjusting the fund’s holdings to respond to market data while maintaining its low-risk profile and adhering to regulatory requirements. A Federal Reserve rate hike, which increases the federal funds rate and typically affects T-Bill yields, may create an opportunity to reallocate capital.

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SEDA’s technology-neutral infrastructure can support applications like tokenized fund providers by providing real-time, tamper-proof and customizable data feeds through application-specific oracle programs. SEDA’s infrastructure can be used to monitor certain data sources for real world events, news and updates. SEDA can for instance be configured to detect a rate hike signaland then transfers this data to the connected application. The third-party application may for example trigger smart contracts to initiate portfolio adjustments, allowing the fund to automatically rebalance holdings to reflect updated market conditions.

Hypothetical Use Case: Responding To Fed Rate Hike 

(Note: This example is illustrative only and does not constitute financial or investment advice.)

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Initial State:

• Fund holds $10 million in T-Bills:
  
  • 50% in 3-month T-Bills yielding 4.2% ($5 million).
  • 50% in 6-month T-Bills yielding 4.3% ($5 million).
• Federal funds rate is 4.5%.

Rate Hike Event Data:

• The Federal Reserve announces a 0.25% rate hike to 4.75%, data reported via FRED API for example.
• SEDA’s oracle program detects the hike report,fetches updated Treasury yields data: 3-month T-Bills now yield 4.5%, 6-month T-Bills yield 4.6% and submits the data to the third-party application.

Portfolio Optimization:

• Analysis: The smart contract determines that new 3-month T-Bills (4.5%) offer better liquidity and yield than holding older 3-month T-Bills (4.2%). The 6-month T-Bills (4.6%) are also attractive but less liquid.
  
  
• Actions by third-party applications:
  
  • Sell $3 million of 3-month T-Bills (4.2%) nearing maturity, leveraging their high liquidity.
  • Purchase $3 million of new 3-month T-Bills (4.5%) to capture higher yields.
  • Maintain $2 million in existing 3-month T-Bills and $5 million in 6-month T-Bills to balance liquidity and duration.

Outcome:

• New portfolio: $5 million in 3-month T-Bills (4.5%), $2 million in 3-month T-Bills (4.2%), $5 million in 6-month T-Bills (4.6%).
• Average portfolio yield increases from ~4.25% to ~4.45%, boosting returns without extending duration significantly.
• NAV is updated to reflect higher-yielding assets, increasing investor returns.

Impact:

• In this example, investors would earn an additional ~0.2% annualized yield on the rebalanced portion, which could translate to ~$20,000 more in annual returns for a $10 million fund.
• The fund would remain competitive with stablecoins and other tokenized Treasury funds (e.g., Ondo Finance), attracting more capital.

The Take-Away: Programmable Oracles Offer The Flexibility Required To Mirror The Real World Onchain. 

Traditional oracles are simply outdated. They don’t have the developer scalability or elasticity to be tailored quickly to the needs of each application. For RWA’s, their expansion onchain is determined by the ability to truly reflect and respond to the condition in which they exist in the physical world. 

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SEDA will be working with leading RWA providers to offer tailored solutions that mirror IRL environments with dynamic oracle feeds to allow digital assets to respond and evolve based on predefined conditions. 

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SEDA: The Internet Onchain. 

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