“With interest rates at historic lows, the values of traditional fixed income portfolios may be vulnerable to losses should rates increase in the future,” Rick Harper, WisdomTree’s Head of Currency and Fixed Income, said in a note. “The WisdomTree Rising Rates ETFS allow fixed income investors to maintain traditional allocations while providing greater flexibility to manage interest rate risk.”
ProShares recently launched a similar strategies. For instance, the ProShares Investment Grade-Interest Rate Hedged ETF (BATS: IGHG) and the ProShares High Yield Interest Rate Hedged ETF (BATS: HYHG) are comprised of long positions in USD-denominated corporate bonds issued by U.S. and foreign companies and take short positions in U.S. Treasury notes. IGHG has a -0.03 duration and a 3.53% 30-day SEC yield while HYHG has a -0.17 duration and a 4.58% 30-day SEC yield. [Alternative ETFs Mitigate Rising Rates Risk]
The Market Vectors Treasury-Hedged High Yield Bond ETF (NYSEArca: THHY) also provides another option to access high-yield, junk bonds. Specifically, the fund’s underlying index employs a type of long/short strategy where it will go long junk bonds and short 5-year Treasury bonds to hedge against adverse movements in interest rates. THHY shows a -0.52 duration and a 3.81% 30-day SEC yield. [Market Vectors Launches Hedged Junk Bond ETF]
Market Vectors Treasury-Hedged High Yield Bond ETF
For more information on fixed-income assets, visit our bond ETFs category.
Max Chen contributed to this article.