Looking ahead, the floating rate notes will generate more interest if Treasury prices fall and yields rise further, which should play out if the Fed continues on its interest rate normalization schedule.
“The Fed has increased interest rates four times this market cycle and the current federal funds target rate is 1% to 1.25%, but inflation is trending around 2.2% using the consumer price index,” notes BlackRock. “Short-term market rates are moving closer to the inflation rate, but money market and cash yields have not kept pace.”
Rivals to FLOT include the iShares Treasury Floating Rate ETF (NYSEArca: TFLO), SPDR Barclays Investment Grade Floating Rate (NYSEArca: FLRN) and the VanEck Vectors Investment Grade Floating Rate (NYSEArca: FLTR).
For more on mixed income ETFs, visit our Fixed Income category.