As a result of the safe and conservative nature of floating rate bonds, investors should not expect high yields. Nevertheless, Treasury money market funds are so starved for yield that anything with an extra basis point or two and the quality and liquidity of a Treasury security will provide an attractive alternative.
Still, TFLO’s 30-day SEC yield of 2.15% is decent. The ETF’s weighted average coupon is 2.42%. Floating rate 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.
TFLO has seen year-to-date inflows north of $336 million.
For more information on the fixed-income market, visit our bond ETFs category.