USFR ETF

The US Equity market is at historical valuation extension in multiples like the S&P 500 to Total Bond Index ratio and in MSCI Cyclical vs MSCI Defensive. At the same time, sentiment indicators are overly bullish, measured by consumer expectations and put call ratios. Even if the Fed cuts another 25 bps in December, USFR is still a safe place to hide out during a much-needed correction in equities.

WisdomTree Floating Rate Treasury Fund ETF is a solid cash ETF investing in floating rate treasury notes. These securities are broadly comparable to t-bills, with marginally higher yields. USFR itself yields 5.4%, around 0.2% higher than t-bill ETFs, making the fund a solid cash-alternative ETF.

USFR is a floating rate treasury fund that has outperformed in rising rate environments but will see decreasing yields with Fed cuts. The market is pricing in a September 2024 cut, making USFR a hold going forward with a stable price but decreasing yield. Investors seeking high dividend yields may consider low volatility treasury funds with higher duration profiles as an alternative to USFR.

USFR: The Treasury FRNs (floating rate notes) ETF that yields dividend monthly at the rates in line with the target rates (5.25%-5.50%). USFR with stable income at above 5% therefore could nicely be the safety side of the barbell in the portfolio, especially when the cut cycle is prolonged to start later. If we are thinking about a place to park cash, USFR also looks very promising among others with the same nature of ultra-short securities such as CDs.

Apart from cash instruments, there are few completely risk-free options in financial markets, but U.S. Treasuries are considered to be a relatively safe choice, as long as interest rates remain stable.

Kevin Flanagan, the Head of Fixed Income Strategy, notes that the UST market responded well to the May FOMC meeting, Powell's press conference, and the April jobs report as Powell downplayed the reintroduction of rate hikes.

USFR invests in floating-rate treasuries that have yields tied to Fed Funds rates, providing a high yield of approximately 5.36% in the current market conditions. The likelihood of rate cuts for the year is diminishing, with a higher chance of easing in September following strong March CPI data. Unlike risky futures investments, USFR offers a secure opportunity to profit from the absence of rate cuts in 2024.

The WisdomTree Floating Rate Treasury Fund (USFR) turned 10 years old in February. It's been an impressive decade for the exchange traded fund.

Broadly speaking, fixed income market observers believe the Fed will, at some point this year, lower interest rates. Perhaps even multiple times.