How do you all think about using Treasury / Muni ETFs vs. Treasury / Muni instead of HYSA?

Hello,

Hope everyone is well.

I have a HYSA that I use for bill pay and savings. It has a 3.90% interest rate. Since interest is taxed at ordinary income at federal and state level, I have begun to research putting that capital into a federal or muni MMF or ETF.

My thoughts on the MMF vs. ETF is that the MMF I keep the principal the same as the market fluctuates but the ETF the market may be down when I need to pay a bill, so then do I lose if I need to sell out of the position for a bill. However, im not sure if since it’s a treasury etf if it basically works the same as the MMF and it’s not really connected to the market in that sense. So in other words, you don’t need to worry about the market timing issue. So for example, if I have to pay my credit card on the 5th of every month, on the 4th if the market is down and I need to sell at the low point for the bill I have lost capital vs. if you are keeping your principal regardless of the market and it’s more set on dividends coming back to you, you may or may not miss out on your dividends like you would miss out on the interest in the HYSA but that is fine. What do you all think?

My second discussion point is the Treasury instruments are exempt from state and local taxes, which are at 0, 10, and 15 in my state and yield about 4.28 sec yield. The muni is 2.80 sec yield, and not shielded from state and local but is shielded from federal taxes which I believe are 0, 12, 22, 24, up to 37 tax brackets. How do you all think about which is best to go with?

My thoughts are it doesn’t matter between etf and MMF that it should act the same way, and is basically a HYSA and my worry about the bill pay is not an actual worry. I think on the treasury vs. muni that the treasury is the better choice and shield from state and local, and the brackets don’t matter since the after tax yield is so much higher regardless.

I wanted to check my thoughts with y’all though. Make sure im not missing anything.