While Treasury FRN issues may provide a floating rate cash management alternative, investors with a tolerance for investment-grade credit risk may want to consider investment grade corporate FRNs accessible with the FLTR ETF, which has produced competitive yield and total returns since its inception.
Index returns assume the reinvestment of all income and do not reflect any management fees or brokerage expenses associated with Fund returns. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses.
1Source: Bloomberg
2Source: FactSet. Market Vectors Investment Grade Floating Rate Index (MVFLTR) consists of U.S. dollar-denominated floating rate notes issued by corporate issuers and rated investment grade by at least one of the three rating services: Moody’s, S&P or Fitch.
3Interest rate duration is a measure of bond price sensitivity to changes in interest rates.
4Credit spread duration is a measure of bond price sensitivity to changes in the difference in yield of a corporate bond over a comparable U.S. Treasury security.
5Barclays U.S. Dollar Floating Rate Note < 5 Years Index consists of debt instruments that pay a variable coupon rate, a majority of which are based on the 3-month LIBOR, with a fixed spread. The Index may include U.S. registered, dollar denominated bonds of non-U.S. corporations, governments and supranational entities.
6London Interbank Offer Rate (LIBOR) refers to the benchmark used by banks, securities houses and investors to gauge the cost of unsecured borrowing in the money markets for various periods of time and currencies.
Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. ©2014 Van Eck Global.
Fran Rodilosso is senior investment officer and a portfolio manager of theMarket Vector Investment Grade Floating Rate ETF (NYSE Arca: FLTR). Launched in April 2011, it was the first U.S. passively-managed ETF of its kind. FLTR seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors US Investment Grade Floating Rate Index (MVFLTR). The MVFLTR Index consists of U.S. dollar-denominated floating rate notes issued by corporate issuers and rated investment grade by at least one of the three rating services: Moody’s, S&P or Fitch.