Fed Delivers on Highly Anticipated Rate Hike

Conclusion

Given the longer-duration aspect of TIPS, there is higher sensitivity to increases in longer-term interest rates, a trend that does not affect the UST FRN market. The graph highlights how the WisdomTree Floating Rate Treasury Fund (USFR), which is based on UST FRNs, outperformed the Bloomberg Barclays U.S. Treasury Inflation Notes Index  by 342 bps since the low in the UST 10-Year yield was reached on July 8, 2016. This period also included seven Fed rate hikes, underscoring the potential advantages of implementing a USFR strategy, especially considering the Fed outlook still looks for additional rate hikes later this year and into 2019.

Unless otherwise noted, data source is Bloomberg, as of September 20, 2018.

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Important Risks Related to this Article

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