A New Rate Regime.

 

On the heels of the Fed’s historically aggressive rate hikes, interest rates have surged to levels not seen in roughly 15 years. As a result, fixed income yields are now at readings that a whole generation of investors have never experienced before. Looking ahead, monetary policy appears inclined to keep rates “higher for longer.” Even if the Fed shifts to rate cuts in 2024, overall yield levels will likely remain elevated compared to the years leading up to and including the Covid pandemic. After enduring historically low rates for more than a decade, a new rate regime has taken hold, returning fixed income to its more traditional role in investors’ portfolios.

Treasury Suite of ETFs

In order to take advantage of the ‘new rate regime’, WisdomTree offers a U.S. Treasury suite of ETFs which provides investors with three distinct solutions for a variety of interest rate landscapes. These strategies utilize the time-tested laddered approach to fixed income investing which consist of only U.S. government debt obligations and no corporate credit exposure: the WisdomTree Floating Rate Treasury Fund (USFR) is designed for income without the volatility; the WisdomTree 1-3 Year Laddered Treasury Fund (USSH) helps manage interest rate risk and shifts in Fed policy; the WisdomTree 7-10 Year Laddered Treasury Fund (USIN) offers to moderately add duration for changing growth and inflation expectations;

Our Fixed Income Family of ETFs

Investors searching for income in an uncertain economic environment should take steps to mitigate risk. We believe in a core plus approach that has a core fixed income vehicle like these three from our WisdomTree family of fixed income ETFs.

A Strategic Solution for Rising Rates: The Barbell Strategy

The barbell approach is a strategic solution for fixed income investing. We believe it’s a particularly valuable tool to utilize in an environment when the bond market is poised to continue to experience elevated volatility. While the Federal Reserve has signaled its intention to keep rates ‘higher for longer’, market perceptions can shift quickly and without much warning.

As a result, we believe it’s prudent to implement a time-tested approach for fixed income investing, such as the barbell strategy, to help navigate volatility without making a specific interest rate ‘call’.

The WisdomTree Barbell Strategy

When USFR, AGZD or HYZD is used in conjunction with our yield-enhanced core strategy, AGGY, we believe it's possible to generate the yield of the Bloomberg U.S. Aggregate Bond Index (Agg), if not more with some pairings, while significantly reducing duration, or interest rate risk. Investors may also want to consider combining our three rate-hedge solutions with their current core bond holdings in an "open-architecture" approach.

 

Watch this video to learn more about the WisdomTree Barbell strategy, how it works and the tool you can use to see the impact of various fixed income allocations in your portfolio.


AGGY - WisdomTree Yield Enhanced U.S. Aggregate Bond Fund
USFR - WisdomTree Floating Rate Treasury Fund
AGGY
50%
USFR
50%
As of 11/10/2023
Yield to Worst
5.61%
Yield to worst: The rate of return generated assuming a bond is redeemed by the issuer on the least desirable date for the investor.
0.20% versus Agg
30-Day SEC Yield
(Unsubsidized)
As of 9/30/2023

AGGY: 5.09%
USFR: 5.40%
Duration
3.03
Duration: A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.
-3.13 versus Agg
WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY)
Seeks to track the price and yield performance, before fees and expenses, of the Bloomberg U.S. Aggregate Enhanced Yield Index
Bloomberg U.S. Aggregate Enhanced Yield Index: a constrained, rules-based approach that reweights the sector, maturity, and credit quality of the Bloomberg U.S. Aggregate Index across various sub-components in order to enhance yield.
Learn more about AGGY
WisdomTree Floating Rate Treasury Fund (USFR)
Seeks to track the price and yield performance, before fees and expenses, of the Bloomberg U.S. Treasury Floating Rate Bond Index
Bloomberg U.S. Treasury Floating Rate Bond Index: A rules-based, market-capitalization-weighted index engineered to measure the performance of floating rate U.S. Treasury notes.
Learn more about USFR

What’s Yielding Now

  • As of 07/09/24, UST floating rate notes (FRNs) are the highest-yielding Treasury security, at 5.45%  
  • UST FRNs are a way to take advantage of the higher yields in the Treasury market without the volatility associated with fixed coupon issues

US Treasury Yields as of 07/09/24

 

    Source: Bloomberg, as of 07/09/24

    Data represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed or sold in the secondary market, may be worth more or less than the original cost. Current performance may be lower or higher than the performance shown. For the most recent month-end performance please click here.

    Click here for Standardized performance data and other important.

Award Winning ETF Issuer

 

The ETF Express US Awards recognizes excellence among ETF issuers and service providers across a wide range of categories. It was an honor to be singled out among our peers at such a critical time in fixed income, when investors need innovative solutions for navigating rising rates.


Learn More

Will the Fed be Able to “Shake It Off” and Cut Rates Later This Year?

June 12, 2024

During this Office Hours replay, you will hear from Professor Jeremy Siegel, Jeremy Schwartz and Kevin Flanagan who discuss the results of the June FOMC meeting. Within this discussion, they focus on where the expected direction of monetary policy here in the US is headed.

Pursuing Income As Rates Stay Higher for Longer? Don’t Forget This

As higher rates offer welcome relief to fixed income investors, it’s easy to lose sight of another important factor. Watch this video for our take on positioning your portfolio for income in today’s environment.

Basis Points Podcast with Kevin Flanagan

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