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Floating Rate Bond ETF (USFR) Hits New 52-Week High

Why Should You Buy Consumer ETFs Now?

For investors seeking momentum, WisdomTree Floating Rate Treasury Fund ( Free Report) is probably on radar. The fund just hit a 52-week high and is up 0.4% from its 52-week low price of $50.18/share.

But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea of where it might be headed:

USFR in Focus

WisdomTree Floating Rate Treasury Fund offers exposure to newly issued U.S. government floating rate notes. It has an effective duration of 0.02 years and average maturity of 1.43 years. The product charges 15 bps in annual fees.

Why the Move?

The floating rate bond has been an area to watch lately, given rising interest rates. Floating rate bonds are investment grade and do not pay a fixed rate to investors but have variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread depending on the credit risk of issuers. Since the coupons of these bonds are adjusted periodically, these are less sensitive to an increase in rates compared to the traditional bonds. Unlike fixed coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising rate environment.

More Gains Ahead?

Currently, USFR might remain strong given a weighted alpha of 0.30. As a result, there is definitely still some promise for risk-aggressive investors, who want to ride on this surging ETF.

 

What do you think?

Written by Susan Bellini

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