Thanks to a 27.1% decline for 10-year Treasury yields, exchange traded funds holding U.S. government debt have been a star asset class in 2014.
Treasury ETFs have soundly outpaced popular asset classes such as equity-based ETFs and junk bond funds, but with the end of the Federal Reserve’s monetary easing regime, the time is now for investors to start evaluating ETFs for the next rate cycle.
On Tuesday’s webcast, Rethinking Fixed Income: Bond ETFs for the Next Cycle, State Street Global Advisors (SSgA) Research Strategist Matthew Bartolini, CFA and SSgA Portfolio Strategist Andrew Goodale will discuss specific ETFs that advisors and investors can use in preparation of what could be a “new look” Federal Reserve in 2015.
For example, some investors still do not know that convertible bonds, which can be easily and efficiently accessed via the SPDR Barclays Convertible Securities ETF (NYSEArca: CWB), are the top-performing fixed income asset class when U.S. interest rates rise.
SSgA Vice President and head of research Dave Mazza recently told ETF Trends in an interview that the swoon currently being endured by U.S. equities could being creating a buying opportunity in convertibles because “the converts market continues to be driven by the underlying equities and we expect equities to do regain their footing.”
Convertible bonds can be looked at as “best of both worlds” securities. Since the bonds can be converted into stock of the issuer, convertibles are often more intimately correlated to equities than other segments of the bond market. But like bonds, convertibles promise coupon payments and return of principal at a set date. [Convertibles ETF Looks Attractive]