First Trust U.S. Treasury Securities, Short-Term, Series 11
As the market faces economic uncertainty, investors may be looking for alternative investments to reduce the effects of stock market volatility. Treasury yields have increased due to the battle with
inflation and could potentially continue higher making them an interesting alternative to stocks. This unit investment trust (UIT) invests in a laddered portfolio of U.S. Treasury securities scheduled to
mature prior to the trust’s termination. Securities which are closer to their maturity date tend to experience smaller price declines than those with longer durations as a result of rising interest rates.
U.S. Treasury Securties
U.S. Treasury securities are non-callable debt obligations that are issued by and backed by the
full faith and credit of the U.S. government, although units of the trust are not. Additionally, the
government assures the timely payment of principal and interest on the underlying securities in
the portfolio. Of course, this applies only to the payment of principal and interest on the securities
held in the portfolio and not the units themselves.
What is a Laddered Portfolio?
The portfolio holds U.S. Treasury securities that are scheduled to mature on specific dates. This
structure is designed to make a distribution to investors after each security’s maturity. Laddering
the portfolio in this manner provides investors with the ability to take advantage of changing
market conditions and the potential to meet shorter-term investment goals. The purpose
of a laddered portfolio is to generate a more predictable income stream with the potential to
minimize interest rate risk by holding both short-term and longer-term securities.
Characteristics of the Trust
Income Distributions – The portfolio seeks to provide investors with monthly income
payments, continuing until all of the Treasury securities in the portfolio have matured or are
redeemed; however, consistent monthly income cannot be guaranteed.
State & Local Tax-Exempt Income – The monthly distributions may be exempt from state and
local taxes, however, they are subject to Federal taxation.
High Quality – Timely payment of principal and interest on the underlying U.S.Treasury
securities is backed by the full faith and credit of the U.S. government.
Liquidity – Units may be redeemed on any business day at the redemption price, which may be
more or less than the original purchase price..
The objectives of this unit investment trust are to distribute current monthly income and to
preserve capital by investing in a laddered portfolio of U.S. Treasury securities. There is, however,
no assurance that the objectives will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objective, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with an investment in U.S. Treasury obligations which are subject to
numerous risks including higher interest rates, economic recession and deterioration of the bond market or investors’ perceptions thereof.
As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.
The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.
This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.