Floating rate notes, like the name suggests, have a floating interest rate. Specifically, 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. Due to their short reset periods, these floating rate funds have relatively low rate risk.
“We continue to advocate an approach that concentrates on a Treasury floating rate strategy,” said WisdomTree. “The WisdomTree Floating Rate Treasury Fund (USFR) offers investors a solution that not only could provide a rate hedge but also offers protection for future Fed rate hikes. In the process, as the USFR yield ‘floats up with the Fed,’ this strategy can also help solve income needs without the duration risk.”
USFR has an effective duration of 0.02 years.
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