WisdomTree has expanded its fixed income range with the launch of a US Treasury floating rate note ETF, ETF Stream can reveal.
The WisdomTree US Floating Rate Treasury Bond UCITS ETF (USFR) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.15%.
USFR looks to offer exposure to floating rate notes (FRNs) issued by the US Treasury. FRNs make payments to bondholders each quarter with the coupon amount linked to movements in short term interest rates.
USFR invests in FRNs that have a 2-year final maturity while the coupon rate is reset daily in reference to the highest accepted discount rate of the most recent 13-week Treasury bill auction, plus or minus a fixed spread determined at the securities' initial issuance.
The firm said this is the first time European investors can access the floating rate note market via an ETF since the US Treasury started offering them in 2014.
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Christopher Gannatti
(pictured)
, head of research in Europe at WisdomTree, commented: "For investors who are looking for another government bond instrument to replace some of the low yield exposures present in many developed market treasuries, US Treasury FRNs could provide a yield enhancement, especially given the flatness of the US yield curve."
Lidia Treiber, fixed Income research at WisdomTree, who joined from Invesco in February, added: "US Treasury FRNs typically have a lower duration profile than floating rate corporate bonds (corporate FRNs) and can be used to help reduce corporate credit exposure within investor portfolios.
"Interest payments on corporate FRNs are exposed to corporate credit risk or risk that the borrower will default on its obligation."
