With the Federal Reserve largely expected to begin hiking interest rates soon, fixed-income assets could weaken, but bond exchange traded fund investors still have some alternative options to help maintain yields and hedge against the rate risks.
On the upcoming webcast, Fixed Income Strategies Ahead of the Fed, James Reiger, Global Head of Fixed Income at S&P Dow Jones Indices, Herb Morgan, CIO and CEO of Efficient Market Advisors, and Scott Eldridge, Director of Fixed Income ETF Product Strategy at Invesco PowerShares Capital Management, help go over fixed-income assets that are vulnerable to rising interest rates and offer alternative strategies to manage risks and maintain yields.
For instance, The PowerShares Senior Loan Portfolio (NYSEArca: BKLN), the largest bank loan-related ETF, provides investors with high yields and protection against rising interest rates.
Since the senior loans have rates that adjust periodically, the floating-rate loans offer investors an alternative method of earning yields with little or no interest-rate risk. Additionally, due to their floating rate component, bank loans are seen as an attractive alternative to traditional corporate bonds in a rising rate environment.
BKLN has an average 33.55 day reset period – the average number of days until the floating component of the loans reset. The ETF also comes with an attractive 6.03% 30-day SEC yield.