UTWO ETF

The US Treasury 2 Year Note ETF offers easy access to 2-year government bonds, yielding 4.2% with monthly payouts. UTWO's single-bond focus minimizes credit risk and ensures pure exposure to the 2-year US Treasury yield curve. The fund's 0.15% expense ratio is competitive, but concentration risk and potential impact on returns during low-yield periods are considerations.

UTWO offers exposure to 2-year Treasuries with a 1.9-year duration, rolling monthly, and is highly correlated with Fed Funds, reflecting monetary policy changes. The ETF is expected to yield a 6% total return by end-2025, assuming a soft landing and a 3% long-term neutral rate. UTWO's structure focuses on capital gains and serves as an alternative to SHY, useful for arbitrage trades in the yield curve.

The US Treasury 2 Year Note ETF gives investors exposure to 2-year treasury notes. While both UTWO and TUA should benefit in an adverse economic scenario requiring the Fed to cut interest rates, UTWO's low duration may not be an effective hedge. Instead, I believe the UTWO ETF is best suited for conservative investors who are willing to take on modest duration risk for a potentially higher return compared to treasury bills.

After raising it to the level of 5.50%, the Federal Reserve is expected to slash interest rates at some points this year.

UTWO did what I aimed for when I made it a strong buy last October; it produced an annualized total return of over 8% with extremely low risk. But there are other market areas more worthy of my attention, prompting me to lower UTWO to a hold. The 10-2 yield curve spread is narrowing, and if it un-inverts, the recession chatter will get very loud, very soon.

UTWO is a fixed-income ETF that invests in 2-year Treasury bonds and cash. The market's expectation of rate cuts is undermining the effectiveness of the Federal Reserve's policy and may lead to longer high rates or even higher rates. This structural and reflexive fact has us eschewing fixed income, especially when the jubilance around a loosening job market may have been a mistake to begin with.

I added UTWO to one of my portfolios recently. This fairly new ETF owns the current 2 year US Treasury note. That's it. The 2-year US Treasury yield is at a compelling level, for many reasons. I like the combination of yield and perhaps rare price appreciation from this lower-volatility investment. I also explain how I use it as part of a 2-step portfolio.

The US Treasury 2 Year Note ETF is a new exchange traded fund that purchases the current 'on-the-run' 2-year Treasury and sells it a month later to roll into the new one. It offers a constant maturity and exposure to a specific point in the yield curve, making it a useful tool for complex trades. UTWO can be used for building a treasury ladder, as a building block for more complex trades, as a yield generating vehicle, and for its simplicity.