Best Treasury ETFs for Q4 2022

USFR, TFLO, and SGOV are the best Treasury ETFs for Q4 2022

Treasury exchange-traded funds (ETFs) enable investors to gain exposure to the U.S. government bond market through a stock-like instrument. Unlike individual bonds that are sold by bond brokers, bond ETFs trade on market exchanges. Treasury ETFs offer investors a way to gain passive, and often broad, exposure to U.S. Treasury bonds. They are composed of a basket of Treasury securities, typically with a focus on a particular maturity or range of maturities.

On Sept. 2, 2022, the 10-year Treasury yield was 3.20%, while it was 1.29% on Sept. 2 2021. Yields have risen, especially since early last year, amid global supply chain disruptions and as the economy continues to recover from the impact of the COVID-19 pandemic. The price of Treasury securities and their yield move in opposite directions, so rising yields mean falling prices and vice versa.

Key Takeaways

  • Treasurys have slightly underperformed the broader market over the past year.
  • Treasury exchange-traded funds (ETFs) with the best one-year trailing total returns are USFR, TFLO, and SGOV.
  • The top holdings of the first two of these funds are floating rate bonds with varying maturity dates, and the top holding of the third is Treasury Bills.

There are 53 distinct U.S. Treasury ETFs that trade in the U.S., excluding inverse and leveraged ETFs as well as ETFs with less than $50 million in assets under management (AUM). Treasurys, as measured by the Bloomberg U.S. Treasury Index, have slightly underperformed the broader market, providing a total return of -11.3% over the past 12 months compared with the S&P 500’s total return of -11.0%, as of Sept. 1, 2022. The best-performing Treasury ETF, based on 1-year trailing total returns, is the WisdomTree Floating Rate Treasury Fund (USFR).

We examine the three best Treasury ETFs below. All numbers below are as of Sept. 1, 2022.

WisdomTree Floating Rate Treasury Fund (USFR)

  • Performance Over One-Year: 0.8%
  • Expense Ratio: 0.15%
  • Annual Dividend Yield: 0.03%
  • Three-Month Average Daily Volume: 2,960,211
  • Assets Under Management: $8.1 billion
  • Inception Date: Feb. 4, 2014
  • Issuer: WisdomTree

USFR seeks to track the Bloomberg U.S. Treasury Floating Rate Index, an index of U.S. floating rate Treasury bonds. These floating rate bonds have interest payments that adjust to short-term moves in interest rates. They are priced at a spread over 3-month Treasury Bills. For this reason, USFR can be a good option for investors looking for stability and risk management in a time of interest rate changes. The top holdings of USFR include floating rate bonds with maturities including in Oct. 2023, Jan. 2024, and April 2024.

iShares Treasury Floating Rate Bond ETF (TFLO)

  • Performance Over One-Year: 0.6%
  • Expense Ratio: 0.15%
  • Annual Dividend Yield: 0.02%
  • Three-Month Average Daily Volume: 680,978
  • Assets Under Management: $2.2 billion
  • Inception Date: Feb. 3, 2014
  • Issuer: BlackRock Financial Management

Like USFR above, TFLO tracks the Bloomberg U.S. Treasury Floating Rate Index, an index of U.S. floating rate Treasury bonds. It shares many of the same characteristics as USFR. The top three holdings of TFLO include floating rate bonds with maturities in Oct. 2022, July 2023, and Jan. 2023, respectively.

iShares 0-3 Month Treasury Bond ETF (SGOV)

  • Performance Over One-Year: 0.3%
  • Expense Ratio: 0.05%
  • Annual Dividend Yield: 0.04%
  • Three-Month Average Daily Volume: 823,600
  • Assets Under Management: $3.3 billion
  • Inception Date: May 26, 2020
  • Issuer: BlackRock Financial Management

SGOV targets the ICE 0-3 Month US Treasury Securities Index, an index of U.S. Treasury bonds with remaining maturities less than or equal to three months. The fund provides targeted access to a small segment of the Treasurys market and can be useful for investors seeking portfolio stability. The top holdings of SGOV include Treasury Bills with maturities on Sept. 6, Oct. 4, and Sept. 27 of this year.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  1. Reuters. "Fed officials see U.S. interest rates rising further."

  2. U.S. Department of the Treasury. “Daily Treasury Par Yield Curve Rates.”

  3. YCharts. “Financial Data.”

  4. VettaFi. “ETF Screener.”

  5. WisdomTree. "USFR: WisdomTree Floating Rate Treasury Fund."

  6. VettaFi. "USFR: WisdomTree Floating Rate Treasury Fund."

  7. iShares. "TFLO: iShares Treasury Floating Rate Bond ETF."

  8. VettaFi. "TFLO: iShares Treasury Floating Rate Bond ETF."

  9. iShares. "SGOV: iShares 0-3 Month Treasury Bond ETF."

  10. VettaFi. "SGOV: iShares 0-3 Month Treasury Bond ETF."

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