Rising Interest Rates & Bond ETFs

Short-duration bonds are a good way for investors to hedge against rising rates. The iShares 1-3 Year Credit Bond ETF (NYSEArca: CSJ) has a duration of 1.95 years, a 30-day SEC yield of 0.9% and gained 0.4% this year through July.

“If your portfolio consists solely of long-term bond funds because you have been trying to maximize yields, it’s time to get into a more balanced portfolio with short and intermediate bonds or bond funds,” Bob Auwaerter, head of fixed income at Vanguard Group, said in the article.

Moreover, investors can consider floating rate ETFs like the PowerShares Senior Loan Portfolio (NYSEArca: BKLN), which has a 4.06% 30-day SEC yield and has a resetting loan component every 43.43 days. [Bank Loan, Floating Rate ETFs for Rising Interest Rates]

Additionally, investors can look at bonds that don’t move with Treasuries, such as high-yield corporate bonds. The SPDR Barclays Short-Term High-Yield Bond ETF (NYSEArca: SJNK) has a 4.63% 30-day SEC yield and a 2.23 year adjusted duration.

“Usually, if rates are going up, it’s because the economy is doing better,” Priscilla Hancock, a managing director at J.P. Morgan Asset Management, said in the article. “In that case, high-yield bonds also are going to do better.”

Or consider a diversified income fund that spreads money into various markets. The SPDR SSgA Income Allocation ETF (NYSEArca: INKM), an active fund designed to provide investors with yield, has a 4.22% 30-day SEC Yield.

For investors who are worried about volatility in stocks, “fixed income still has a place,” Jonathan Mackay, senior fixed-income strategist at Morgan Stanley Wealth management, said in the article. “You just have to be much more tactical and nuanced.” [Don’t Let Rising Rates Bully You Out of Bond ETFs]

For more information on bonds, visit our bond ETFs category.

Max Chen contributed to this article.