Fixed income is offering investors and advisors potent yields right now, but it isn’t always straightforward to pick the right asset. Some yields may be deceptive if they come with unnecessary risks, like certain tracts of corporate or even municipal bonds. Treasuries, on the other hand, offer debt security backed by the U.S. government with appealing yields of their own. That may invite advisors to consider a treasury yields fund like the WisdomTree Floating Rate Treasury Fund (USFR).
Starting with a yield rundown, the possibilities jump out immediately. Four-week Treasury yields sat at 5.1% as of June 21, while one-year yields sat at 5.26%. Those yields are better than investment-grade corporates and of course, municipal offerings right now too. So why now?
With the Fed officially pausing for June, those yields already solidified themselves for intrigued advisors. What’s more, the Fed prediction market has changed. Whereas some had hoped for or even expected one, two, or three rate cuts, this year may not see any. More rate hikes may instead be the order of the day.
A treasury yields fund like USFR offers an intriguing way to play the new scenario. Whether that means staggered increases or a “higher for longer” regime,” USFR’s use of floating rate notes (FRNs) can help. FRNs float, with interest rate payments that change over time. Absent rate cuts, that means investors can expect yields to stick around where they are or even rise.
USFR charges a 15 basis point fee to track the Bloomberg U.S. Treasury Floating Rate Bond Index. USFR has returned 2.4% YTD, meanwhile, adding $1 billion in net inflows over the last month. The ETF has risen to $16.9 billion in AUM as investors flock to its yield-focused approach. For investors looking for a treasury yields fund, USFR provides a notable option to consider.
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