WisdomTree Floating Rate Treasury Fund

USFR

Market cap $16.2B

Moving from CDs into highly liquid Treasury bills can double your income with almost no additional risk. With a fixed income ETF, your money is available whenever you need it.

The WisdomTree Floating Rate Treasury Fund ETF focuses on floating rate treasury notes. These securities have effectively identical credit and rate risk to t-bills, but trade at a small spread to these, and with a 3.7% forward yield. Returns are higher too, volatility is the same.

The WisdomTree Floating Rate Treasury Fund ETF is rated a buy for its low volatility and better risk profile than long-duration vehicles. USFR's floating-rate and near-zero duration structure offers strong risk-adjusted returns amid ongoing Fed rate cuts and persistent inflation concerns. Long-duration Treasuries remain unattractive due to elevated term premiums, fiscal deficits, and market skepticism about a dovish Fed.

WisdomTree Floating Rate Treasury Fund earns a buy rating for its yield premium and low-risk profile vs. traditional Treasury bill funds. USFR offers a 10-15 basis point spread over 3-month T-bills, with a 4.33% trailing 12-month yield and a low 0.15% expense ratio. With low default and duration risk, the fund is ideal for tax-sheltered accounts, especially as Fed rate cuts will likely reduce cash yields below 3%.

There are expectations the Federal Reserve will commence lowering interest rates as soon as next month. That potentially will start an extended monetary loosening campaign.

I rate WisdomTree's USFR ETF a sell due to the likelihood of rate cuts this Fall, which will immediately reduce its yield. USFR's weekly reset structure means its payouts will drop faster than corporate floaters and fixed-rate ultra-short bond funds. Recent performance shows corporate floaters and fixed-rate funds like VUSB and SGOV already offer higher total returns.

WisdomTree Floating Rate Treasury Fund ETF's yield and value are closely tied to Fed policy, making it highly sensitive to anticipated rate cuts. USFR invests in short-dated floating-rate issuances, adding risk to the strategy if the Federal Reserve cuts rates at the September 2025 FOMC meeting. I recommend rotating out of USFR and into intermediate-term fixed-rate Treasury ETFs like SCHR or VGIT for better risk/reward.

By Vanya Sharma, Senior Associate, Capital Markets Key Takeaways As equity markets remain volatile, WisdomTree's fixed income ETFs—like AGGY and SHAG—offer investors a way to anchor portfolios with higher-yielding, investment-grade exposure while managing interest rate risk.

Following the recent spike in 30-year Treasury yields, global fixed income investors may be leery of adding duration in bond portfolios. But there are avenues for allaying those concerns while maintaining exposure to the relative steadiness of U.S. government debt.

Treasury floating rate notes and ETFs like the WisdomTree Floating Rate Treasury Fund (USFR) are often seen as beneficial tools to fixed income investors when yields on U.S. government debt are rising. Rates have been mostly steady this year.