For instance, the actively managed PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) has a 0.53% effective duration, which roughly translates to a 0.53% price decline in the event interest rates were to rise 1%. Other ultra-short-duration bond ETFs include Guggenheim Enhanced Short Duration Bond (NYSEArca: GSY), which has a 0.47% effective duration, SPDR SSgA Ultra Short Term Bond ETF (NYSEArca: ULST), which has a 0.23 year duration, and iShares Short Maturity Bond ETF(NYSEArca: NEAR), which has a 0.92 year duration.
“These are not money-market funds,” Sarah Bush, an analyst at Morningstar. ” You could see modest losses.”
Additionally, Stephen Kane, co-portfolio manager of the Metropolitan West Ultra Short Bond Fund, warns that while these types of funds may provide better income-generation than money market funds, investors are exposed to some credit risk. The ultra-short bond ETFs include slightly higher yielding corporate debt that are not as highly rated as U.S. Treasuries. MINT has a 0.49% 30-day SEC yield, GSY has a 1.05% 30-day SEC yield, ULST has a 0.30% 30-day SEC yield and NEAR has a 1.16% 30-day SEC yield.
Alternatively, investors can look at conservative short-duration Treasury bond ETFs, such as the iShares Short Treasury Bond ETF (NYSEArca: SHV), which has an effective duration 0.43 years and 0.07% 30-day SEC yield, and the SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL), which has a 0.15 year duration and a -0.09% 30-day SEC yield. [Rising Rate Preparation With Short-Term Bond ETFs]
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.