ETF Spotlight on the WisdomTree Bloomberg Floating Rate Treasury Fund (NYSEArca: USFR), part of an ongoing series.
Assets: $2.5 million
Objective: The WisdomTree Bloomberg Floating Rate Treasury Fund tries to reflect the performance of the Bloomberg U.S. Treasury Floating Rate Bond Index, which is comprised of floating rate public obligations of the U.S. Treasury.
Holdings: U.S. Treasury FRN 0.095% 2/31/2016
What You Should Know:
- WisdomTree is the sponsor of the fund.
- USFR has a 0.15% expense ratio.
- The ETF currently tracks one U.S. Treasury floating rate note.
- The fund was launched February 4, 2014.
- USFR is down 0.3% since its inception.
- The ETF has a -0.03% 30-day SEC yield.
- Funds can run a negative yield over the short term, which suggests investors are willing to pay a premium for protection against a potential spike in interest rates.
- The notes’ have a so-called reset period with interest rates tied to a benchmark, such as the Fed funds, LIBOR, prime rate or U.S. Treasury bill rate.
- The fund has an effective duration of 0.02 years, so a 1% rising interest rates would translate to about a 0.02% dip in the ETF’s value.
- “We believe that floating rate Treasury securities represent an effective way for investors to help reduce their exposure to rising interest rates while generating income payments that are backed by the full faith and credit of the U.S. government,” according to WisdomTree.
- Investors should consider using limit orders to better control trades in USFR.
Next page: The latest news
The Latest News:
- The U.S. Treasury recently sold its first floating-rate note offering in 17-years, reports Liz Capo McCormick for Bloomberg.
- The U.S. sold $13 billion floaters at a bid-to-cover ratio, which compares the amount of bids to the amount of securities offered, of 4.67, whereas fixed-rate debt sold this year showed a bid-to-cover of 2.9.
- “Demand has been very strong,” Larry Milstein, managing director of government-debt trading at R.W. Pressprich & Co, said in a separate Bloomberg article. “There certainly has been an underlying positive tone to the Treasury market which has been driven by the geopolitical risk, and also growth in the emerging markets, and China for that matter.”
WisdomTree Bloomberg Floating Rate Treasury Fund
Source: Yahoo! Finance
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.