Floating Rate Government Bond

Floating-rate government bond (floaters) mutual funds and ETFs invest the majority of... Floating-rate government bond (floaters) mutual funds and ETFs invest the majority of their assets in government bonds that see interest payments periodically adjust based on an underlying reference rate. Typically, floaters based on U.S. Treasury bills might see their coupon (the interest it pays investors) reset every 3 months to reflect changes in the U.S. Treasury bill interest rates. These products are usually issued by the U.S. Treasury with a 2 year maturity via auctions. Floaters are attractive for investors who believe interest rates may rise in the near term. Unlike fixed-income bonds, a rising interest rate environment is beneficial for owners of floaters because they see their interest payments rise. On the other hand, floaters will not benefit from falling interest rates, and in fact their market value may decline. These products are also useful for investors who want to park excess cash in high quality products with good liquidity, as government bond based floaters typically have the lowest credit risk among similarly structured bond products. Last Updated: 12/26/2024 View more View less

Floating-rate government bond (floaters) mutual funds and ETFs invest the majority of their assets in government bonds that see interest payments periodically adjust based on an underlying reference rate. Typically, floaters based on... Floating-rate government bond (floaters) mutual funds and ETFs invest the majority of their assets in government bonds that see interest payments periodically adjust based on an underlying reference rate. Typically, floaters based on U.S. Treasury bills might see their coupon (the interest it pays investors) reset every 3 months to reflect changes in the U.S. Treasury bill interest rates. These products are usually issued by the U.S. Treasury with a 2 year maturity via auctions. Floaters are attractive for investors who believe interest rates may rise in the near term. Unlike fixed-income bonds, a rising interest rate environment is beneficial for owners of floaters because they see their interest payments rise. On the other hand, floaters will not benefit from falling interest rates, and in fact their market value may decline. These products are also useful for investors who want to park excess cash in high quality products with good liquidity, as government bond based floaters typically have the lowest credit risk among similarly structured bond products. Last Updated: 12/26/2024 View more View less