Play the Reflation Trade

with a Barbell Strategy

While the barbell approach is a strategic solution for fixed income investing, it’s particularly valuable in a rising rate environment. Interest rates are already at historic lows. Given the unprecedented level of fiscal and monetary stimulus, months of pent-up demand, normalization of supply chains and rollout of effective vaccines, we may see higher rates in the years to come.

As a result, the reflation trade has been receiving increased attention. In this environment, we believe it’s prudent to mitigate overall duration risk by implementing strategies that reduce it or hedge it out.

What Is a Barbell Investing Strategy?

With interest rates at such historical lows, investors should consider the time-tested “barbell” approach to fixed income investing. It attempts to take “rate calls” out of the process while also serving to mitigate potential rate risk. We offer three different barbell solutions to consider based on an investor’s income needs and risk parameters:

U.S. Treasury-Based: The WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Floating Rate Treasury Fund (USFR)

Investment Grade-Based: The WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD)

Core Plus: The WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Interest Rate Hedged High Yield Bond Fund (HYZD)

The desired outcome? Enhanced yield and lower interest rate risk.

WisdomTree's Head of Fixed Income Strategy Talks AGGY and USFR Barbell Approach on NYSE's What's the Fund
WisdomTree's Head of Fixed Income Strategy, Kevin Flanagan, joins NYSE's Judy Shaw and Matt Kobach for an episode of What's the Fund to discuss a fixed income solution called a barbell strategy, a combination of the WisdomTree Floating Rate Treasury Fund, ticker USFR, and the WisdomTree Yield Enhanced U.S. Aggregate Bond Fund, ticker AGGY.
Kevin Flanagan on Enhancing Yield with a Barbell Approach
Our Head of Fixed Income Strategy, Kevin Flanagan, met with the Founder & CEO of RIA Channel, Julie Cooling, to discuss how fixed income investors can potentially enhance yield with a WisdomTree barbell strategy.

Commentaries from Kevin Flanagan

The WisdomTree Barbell Strategy

When USFR, AGZD or HYZD is used in conjunction with AGGY we believe it's possible to generate the yield of the Bloomberg Barclays U.S. Aggregate Bond Index (Agg), if not even more with some pairings, while significantly reducing duration, or interest rate risk.


AGGY
50%
USFR
50%
As of 06/09/2021
Yield to Worst
0.94%
Yield to worst: The rate of return generated assuming a bond is redeemed by the issuer on the least desirable date for the investor.
-0.52% versus Agg
Duration
3.63
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.
-2.91 versus Agg
Yield Enhanced U.S. Aggregate Bond Fund (AGGY)
Seeks to track the price and yield performance, before fees and expenses, of the Bloomberg Barclays U.S. Aggregate Enhanced Yield Index
Bloomberg Barclays U.S. Aggregate Enhanced Yield Index: a constrained, rules-based approach that reweights the sector, maturity, and credit quality of the Barclays U.S. Aggregate Index across various sub-components in order to enhance yield.
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Learn more about AGGY

The Case For AGGY

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.
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Learn more about USFR

The Case for USFR

Basis Points Podcast with Kevin Flanagan


Additional Offering for Financial Professionals