Some fixed-income investors are looking at bond ETFs with shorter durations for cover if interest rates rise further. Bank loan ETFs also provide a cushion against higher rates.
“Bonds with longer durations — meaning they mature at a later date — tend to be more sensitive to interest-rate changes, making them more volatile in price than bonds with shorter durations,” writes Erin Arvedlund, a columnist for the Philadelphia Inquirer.
For rate protection, she points to short-duration bond ETFs such as Vanguard Short-Term Bond (NYSEArca: BSV), Guggenheim Enhanced Short Duration Bond (NYSEArca: GSY) and PIMCO Enhanced Short Maturity (NYSEArca: MINT). [Ultra-Short-Duration Bond ETFs as a Cash Alternative]
These short-term bond ETFs have also been in the spotlight with money market mutual funds facing SEC reform measures. [Money Market Debate Puts Focus on Short-Duration ETFs]