2023 contained plenty of takeaways in the dynamic world of fixed income, as bonds roared back into relevance. Still, despite fixed income’s resurgence, many investors likely have questions about their debt holdings in 2024. What’s more, many other investors likely still have cash on the sidelines whether they’re waiting for a sign in equities or fixed income. Looking back on 2023, investors may want to consider how a floating rate ETF like USFR could play a role to start the year.
The rate regime still looms over the fixed income landscape to start 2024. Markets continue to eagerly look out for potential rate cuts, of course, but they aren’t guaranteed. Significant rate cuts rely on a big slowdown for the economy, of course, which failed to materialize despite so much recession watching last year.
WisdomTree Investments is looking at short-duration fixed income to “play the rate cut trade.” Overall, however, the firm remains allocated to floating rate notes (FRNs), a type of Treasury released in the 2010s. FRNs offer solid yields and adapt to changing rates, making them a resilient option for investors looking for exposure to fixed income.
A floating rate ETF like USFR, the WisdomTree Floating Rate Treasury Fund, can present one appealing option, then. USFR’s balance makes it a great stepping stone between duration and shorter duration, or cash and bonds. Its resilience and steady yields, about 5.5% right now, make it an intriguing play amid continued fixed income uncertainty.
USFR will hit its tenth anniversary next month, charging 15 basis points to track the Bloomberg U.S. Treasury Floating Rate Bond Index. USFR has returned 5.2% over the last year, too, outperforming its ETF Database Category average. For investors looking for a starting point in fixed income this year, the floating rate ETF may appeal.
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