Consequently, the floating rate ETFs have very short effective durations. The iShares FLOT ETF has an effective duration of 0.13 years and comes with a 0.37% 30-day SEC yield. FLRN has a duration of 0.12 years and a 0.47% 30-day SEC yield. FLTR has a 0.12 years duration and a 0.48% 30-day SEC yield.
The effective duration is a measure of the sensitivity of a bond price to changes in interest rates. The greater the duration the greater the interest rate risk. For example, 2 year duration would translate to a 2% dip in the bond ETF’s price if interest rates were to increase 1%. [New High-Yield Bond ETF Protects Against Rising Rates]
For more information on fixed income assets, visit our bond ETFs category.
Max Chen contributed to this article.