Consequently, investors who expect rates to rise would want to shift to bond ETFs with shorter durations. Todd Rosenbluth, director of ETF research at Standard & Poor’s Capital IQ, suggests some options, like the SPDR BarCap Short-Term High-Yield Bond ETF (NYSEArca: SJNK), which has a 2.9 year duration and a 5.9% yield, and the Vanguard Short-term Corporate Bond Index ETF (NYSEArca: BSV), which has a 2.8 year duration and a 2.1% yield.
Alternatively, investors can also consider ETFs that hold floating rate notes, which come with variable interest rates that help protect against rate changes. Investment grade floating rate ETFs, include the iShares Floating Rate Note Fund (NYSEArca: FLOT), SPDR Barclays Capital Investment Grade Floating Rate (NYSEArca: FLRN) and Market Vectors Investment Grade Floating Rate (NYSEArca: FLTR). [Bank Loan ETFs Offer 4% Yields, Protection from Rising Rates]
Additionally, SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN), PowerShares Senior Loan Portfolio (NYSEArca: BKLN), and Highland/iBoxx Senior Loan ETF (NYSEArca: SNLN) provide exposure to companies that typically fall below investment-grade credit ratings, and they also come with the floating rate component. [Bank Loan ETFs: More Competition in Red-Hot Sector]
For more information on bonds, visit our bond ETFs category.
Max Chen contributed to this article.