USFR: A Low-Risk Option

Summary

• WisdomTree Floating Rate Treasury Fund ETF offers low-risk exposure to floating-rate Treasuries, minimizing interest rate risk and tracking its benchmark closely, minus a small fee drag.
• The current macro environment supports attractive short-term yields, but anticipated Fed rate cuts by year-end could lower future coupon payments for USFR holders.
• Strong institutional demand for FRNs and persistent US fiscal deficits may push up yields, potentially benefiting the Fund's future coupons.
• Despite some more attractive alternatives, USFR remains a solid, highly liquid, credit-risk-free holding; I recommend holding or short-term buying for portfolio stability.

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Introduction

The WisdomTree Floating Rate Treasury Fund (NYSEARCA:USFR) investment vehicle is an ETF that seeks to replicate the performance, before expenses, of the Bloomberg U.S. Treasury Floating Rate Bond Index. It is composed of floating-rate U.S. Treasury bonds, with coupons that

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