Examining Negative Duration and Rate-Hedged ETFs | ETF Trends

Fixed income exchange traded funds, particularly those with exposure to the longer end of the yield curve, have been the place to be this year.

The S&P 500 has looked pitiful in comparison to ETFs such as the PIMCO 25+ Year Zero Coupon U.S. Treasury Index Fund (NYSEArca: ZROZ) and the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT), which have posted year-to-date gains of 34.8% and 19.2%, respectively.

This year’s action in Treasury yields would appear to indicate that the Federal Reserve will not be raising interest rates anytime soon. Of course, there are market observers that believe the opposite is true, particularly if the U.S. economy continues expanding.

On that note, one of the most prominent themes in the ETF industry dating back to last year has been investors’ increased interest in low duration bond funds as a means of protecting portfolios against what many believe is an inevitable rise in interest rates.

Issuers have met that increased interest with a growing number of bond ETFs that target exceptionally low, and in some cases, negative duration as wells funds that offer interest rate hedges.

In this list, we explore an array of hedged and negative duration ETFs. After all, while a Fed rate hike may not be imminent, it pays to be prepared. Let’s get started with the…