iShares Treasury Floating Rate Bond ETF (TFLO) in 2026: A Safe Haven Amid Fed Uncertainty?

• What Is the iShares Treasury Floating Rate Bond ETF (TFLO)?
• Performance and Liquidity: Steady as She Goes
• TFLO vs. Competitors: USFR and FLOT
• Outlook: Fed Policy Is the Deciding Factor
• FAQs

The iShares Treasury Floating Rate Bond ETF (TFLO) offers investors exposure to U.S. Treasury floating-rate notes, a niche but increasingly relevant asset class as the Federal Reserve signals potential rate adjustments in 2026. With its low volatility, automatic interest-rate resets, and near-zero credit risk, TFLO has emerged as a defensive play for portfolios. But how does it stack up against competitors like USFR and FLOT? And is it still a buy in January 2026? Let’s break it down.

What Is the iShares Treasury Floating Rate Bond ETF (TFLO)?

TFLO tracks the Bloomberg U.S. Treasury Floating Rate Index, holding U.S. government-issued floating-rate notes (FRNs) with maturities up to 2027. These bonds adjust their coupon payments weekly based on the latest 3-month T-bill auction, minimizing interest-rate risk. As of January 2026, the ETF’s top 10 holdings comprise over 99% of its portfolio, all backed by the full faith and credit of the U.S. government. This makes TFLO one of the safest fixed-income ETFs available.

Performance and Liquidity: Steady as She Goes

TFLO delivered modest but stable returns in late 2025 and early 2026, aligning with its low-volatility mandate. Key metrics as of January 17, 2026:

• Price: $50.56
• 1-month return (price): +0.02%
• 3-month return (NAV): +1.04%
• YTD return (NAV): +0.14%

TFLO vs. Competitors: USFR and FLOT

TFLO’s direct rival is the WisdomTree Floating Rate Treasury Fund (USFR), which also holds U.S. Treasury FRNs with a 0.15% expense ratio. USFR dominates in size ($16.4B AUM vs. TFLO’s $6.44B), potentially offering better liquidity for large trades. Meanwhile, the iShares Floating Rate Bond ETF (FLOT) takes a different approach by including corporate FRNs, introducing credit risk absent in TFLO and USFR.

Outlook: Fed Policy Is the Deciding Factor

TFLO’s 2026 trajectory hinges on the Fed’s next moves. The market currently prices in ~48 bps of rate cuts this year. While FRNs protect against rising rates, their coupons WOULD decline in a easing cycle. Still, monthly index rebalancing ensures the portfolio stays current, and demand for low-risk, rate-responsive assets remains strong.