Frankfurt-headquartered index provider Solactive writes that interest rates have been steadily rising over a little more than a year, primarily driven by inflationary pressures and the actions taken by the Federal Reserve. “Consequently, Treasury instruments have experienced a resurgence in popularity and demand, leading investors to turn to these instruments to mitigate risks and capitalize on the stability and reliability of Treasury securities.
“Foreseeing this potential, Solactive is pleased to announce that WisdomTree has broadened its range of US Treasury-linked products by launching five Digital Funds seeking to track Solactive indices. These funds are now available to investors in 21 US states via WisdomTree Prime, a personal finance app within a blockchain-native ecosystem.”
Among the new offerings, the WisdomTree Floating Rate Treasury Digital Fund (FLTTX) is linked to the Solactive US Treasury Floating Rate Bond Index. This index provides exposure to the short end of the yield curve, as the coupon rate of index components is reset regularly, according to the 13-week bill auction results. The current coupon rate of the index is above 5.4 per cent, and its effective sensitivity to changes in interest (interest rate risk) is close to zero. The index is rebalanced at the end of each month, and its components are weighted using the market value based on the last evaluated bid price and accrued interest. Unlike traditional bonds that pay a fixed coupon, floating rate bonds have a variable coupon that is adjusted periodically according to the federal funds rate, thus eliminating interest rate risk.
Furthermore, four more funds are linked to Solactive indices: The WisdomTree 3-7 Year Treasury Digital Fund (WTTSX), seeking to track the Solactive US 3-7 Year Treasury Bond Index; the WisdomTree 7-10 Year Treasury Digital Fund (WTSTX) seeking to track the Solactive US 7-10 Year Treasury Bond Index; the WisdomTree Long Term Treasury Digital Fund (WTLGX) seeking to track the Solactive US 20+ Year Treasury Bond Index; and the WisdomTree TIPS Digital Fund (TIPSX) seeking to track the Solactive US Treasury Inflation-Linked Bond Index.
Timo Pfeiffer, Chief Markets Officer at Solactive, says: “Floating rate bonds are typically sought after by investors aiming to diversify and hedge their portfolios, safeguarding against rising inflation. The five Treasury indexes made available to WisdomTree underscore our focus on delivering indexes in the fixed income space alongside equities. We are thrilled that WisdomTree has chosen to continue our relationship, enabling us to be part of this innovative app through the WisdomTree digital funds tracking Solactive Treasury indexes, which brings new investment opportunities to the digital world with the application of blockchain technology.”
Will Peck, WisdomTree Head of Digital Assets, says: “These new Digital Funds allow us to offer a curated experience to WisdomTree Prime users, bringing mainstream assets into the evolving digital ecosystem. We believe that blockchain-enabled finance has the potential to improve the investor experience through enhanced liquidity, transparency, and standardisation, which we aim to achieve over time, and our Digital Funds are setting the foundation as we seek to bridge the gap between traditional finance and digital finance today.”