USFR: The Safety Side Of The Barbell

seekingalpha05-30

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 ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUSFR: The Safety Side Of The Barbell\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-30 15:49 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4696377-usfr-etf-the-safety-side-of-the-barbell><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>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 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4696377-usfr-etf-the-safety-side-of-the-barbell\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4696377-usfr-etf-the-safety-side-of-the-barbell","article_id":"2439869935","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/620921431/image_620921431.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2439869935","pubTimestamp":1717055391,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"USFR: The Treasury FRNs  ETF that yields dividend monthly at the rates in line with the target rates .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.One important point to consider could be thefloating treasuryas the building blocks of the fund are adjusting rates on a weekly basis, and that could reflect coupon rates to adjust downward when interest rates fall.Editor's note: Seeking Alpha is proud to welcome Conversational Convexity as a new contributing analyst. You can become one too!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4588":"碎股","USFR":"WisdomTree Bloomberg Floating Rate Treasury Fund"},"translate_title":"USFR：杠铃的安全面","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"USFR":1},"content_text":"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.One important point to consider could be the floating treasury as the building blocks of the fund are adjusting rates on a weekly basis, and that could reflect coupon rates to adjust downward when interest rates fall.Editor's note: Seeking Alpha is proud to welcome Conversational Convexity as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more »    Jacobs Stock Photography Ltd/DigitalVision via Getty Images WisdomTree Floating Rate Treasury Fund ETF (NYSEARCA:USFR) selects FRNs (Floating Rate Notes) that would go as far as a two-year term, and as for FRN coupons adjust weekly based on the most recent 90-day T-bill auction, the fund therefore is likely to be resilient to the mark-to-market losses as interest rates rise. Further, how the fund transfers the benefit of high front end rates of 5.25%-5.50% into monthly dividend to investors has set forth the fund as a stable income fund for any portfolio strategy.   USFR and SPX (Seeking Alpha) Source: Seeking Alpha Note: The chart exhibits USFR's total return and the S&P 500 Index (SPX) starting SEP2023, where the index was on a dipping trend during the market’s soft-landing pricing in 4Q2023. During this same period, USFR continued to perform well. USFR To Be The Safety Side Of The Barbell  As for the floating rate note ties closely to the target federal fund rates, Inflation and Unemployment Rate therefore could be the area to help better understand how the federal fund rates could be like over the latter of the year.   Services Inflation (BLS) Source: BLS For inflation, the downward trajectory to pave way for the cut cycle while expected broadly, it’s somewhat yet to be seen as sturdily formed. April 2024 Inflation was 3.4%, 2% was from Shelter (Price change in Rent & Mortgage Payment), and another 1.4% was from other services items such as Auto Insurance, and Electricity. The shelter inflation, for the most part, could be about the Owner Equivalent Rent (OER) or the mortgage payment. The Shelter takes part of about 36% of the overall inflation bucket, and OER is 27% of this overall bucket. Taking a closer look at the OER situation, higher mortgage rates drive lesser refinance, and therefore lesser Supply of houses for sale. The recent wage growth could drive the decision to buy sooner than later, and therefore demand is likely to increase. This imbalance demand-supply dynamic could turn into a decision to buy a house regardless, or to put the part that supposed to be a mortgage payment into the investment portfolio. The first turn could directly reflect on the OER inflation to be difficult to come down, or the latter turn could increase consumer wealth and therefore stretch out the slowing yet benign consumer activities. If taking another peek at the overall activity, the latest unemployment rate has increased to 3.9%, and this might bring another aspect we might like to think about, which is whether the overall activities to slow down could be the significant explanation for the cut cycle to start, even though the firmly downward inflation trend is yet to solidly form. Nevertheless, given the USFR properties to be very much of a cash-like security and as long as the Target Rates are high, USFR would still deliver good dividends and be the safety piece in the portfolio to balance out others that are riskier. USFR As A Place To Park Cash  The fund holds only US treasuries which are considered risk-free, and would go as far as a two-year term. This gives a sense of security as for US treasury is fully backed by the government. The stable monthly dividend distribution at the current prevailing 5.25%-5.50% makes USFR to be a very good place to keep cash, among others ultra-short securities such as CDs.   Historical CD Rates (USA Today) Where Downside Exposure Lies Considering Duration Risk: As for the shorter time to maturity would carry lesser duration risk, USFR therefore tends to be well immune to risk on this part. Considering the fund to break the buck: if the time machine takes us back to the time when the first-ever MMF broke the buck in 2008, USFR holds components that are fully backed by the government, which is less likely to experience the same situation as the Reserve Primary Fund in 2008. Nevertheless, as far as the fund is the ETF, listed and trading in the market, the downside exposure could then be about the market pricing on the magnitude of the cut. A deep cut may tip off flow from the fund, perhaps not as much as the Market Event for the Reserve Primary Fund but could be in a case of somewhat quite noticeably. If such a rare event occurs and happens alongside a much lesser dividend payout (from adjusted rates to the deep cut), the total return of USFR could then be so much less (perhaps so much so to making the case of even lesser than CDs.) Conclusion  USFR can be one of the safe places to keep cash, even when the cut cycle is already starting. As long as the Target Rates are high, USFR would still deliver good dividends. The fund landscape to include only Treasury FRNs which are fully guaranteed and therefore considered risk-free, deems the fund as a cash-like security. Together with a monthly dividend to investors, USFR could be brought forward as \"a safe and stable income fund\" for any portfolio strategy.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2439869935"}