“Some market participants may believe that certificates of deposit, or CDs, are a better solution. However, there are some important items to consider. First up, UST FRNs are backed by the full faith and credit of the U.S. government. CDs are insured by the Federal Deposit Insurance Corporation (FDIC), but only up to $250,000 per person, per bank, per ownership category,” according to WisdomTree.
USFR has a 30-day SEC yield of 1.61%, which is better than what is found on many short-term cash investments. All of the fund’s holdings are rated AAA, so credit risk is not an issue. Floaters are designed to be low duration products as highlighted by USFR’s effective duration of just 0.02 years.
For more on the bond market, visit our fixed income channel.