"Floating" Up To The Ceiling

This Is Now

T-bills that will mature in October of this year have witnessed some modest increases as of this writing. Remember, early October tends to be the consensus estimate for the deadline date this time around. Using a similar approach here in 2017 as we discussed above, the focus thus far has been on the bill that matures on October 19, and just within the last week, the yield climbed 10 bps.

Reducing the Potential Uncertainty Quotient

While there are probably some who feel this time around there may not be a solution on a timely basis, many participants seem to be operating under the assumption that the U.S. government ultimately will meet its obligations. However, even the slightest prospect of a temporary technical default can create investor anxieties, a sentiment one does not usually think about with “safer” investments. As I’ve detailed, the UST market, specifically t-bills, has the potential to see increased volatility in the weeks/months ahead. For those investors who wish to avoid the potential debt ceiling scenario, the WisdomTree Bloomberg Floating Rate Treasury Fund (USFR) offers an alternative that focuses on floating rate Treasuries with stated maturities of essentially one to two years. In addition, USFR is also an interest rate strategy one could utilize as “Fed protection” to help guard against the possibility for additional rate hikes.

Unless otherwise noted, data source is Bloomberg, as of July 20, 2017.

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Disclaimer: Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. U.S. investors only: To obtain a prospectus containing this ...

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