

XTWO is a well-constructed, low-cost ETF tracking 2-year US Treasuries, but its yield is less attractive than alternatives. Despite taking more interest rate risk with XTWO, investors are not compensated with higher yield compared to floating rate Treasury ETFs like USFR. Current market conditions make floating rate Treasury ETFs more appealing, offering higher yields with lower risk than XTWO.

Short-term bonds are generally defined as debt with maturities of one to three years. Additionally, these bonds come in a variety of forms, including Treasuries.

Treasury yields rose on Wednesday following stronger-than-expected retail sales and encouraging remarks from a Federal Reserve member. Data from the Census Bureau shows that sales for U.S. retail and food services sales for December 2023 were $709.9 billion.

The yield for the two-year Treasury note surged to its highest level in 16 years after a surprisingly strong jobs report. With yields soaring to record levels, investors may want to look into Treasury ETFs.
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