WisdomTree Floating Rate Treasury Fund

USFR

Market cap $17B

Federal Reserve hikes are increasingly likely, with inflation increasing and unemployment stable. Lots of investments and ETFs should outperform during a period of rising rates. I'll be giving a quick rundown of four such ETFs in this article. Funds vary in risk, from cash ETFs to riskier choices, with the possibility of outstanding gains.

Inflation-protected funds don't always protect against inflation. As consumer-price inflation hits a three-year high due to the Iran war, the premise in their names is being tested.

Inflation is increasing once more. Rates could follow. Cash would perform quite well during a rising rates scenario, seeing higher yields, and minimal price movements or losses. I'll be giving a quick rundown on three strong cash ETFs in this article.

This year, advisors are contending with a fixed income conundrum. The war in Iran sent energy prices surging, reigniting inflationary pressures in the process.

This year has brought two Federal Open Market Committee (FOMC) meetings, but no interest rate reductions by the Federal Reserve. Following the most recent meeting, it appears the best-case scenario for 2026 rate reductions is just one.

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.