BlackRock Managing Director and iShares Head of Fixed Income Strategy Matt Tucker joined ETF Trends Publisher Tom Lydon at the Morningstar ETF Conference in Chicago to talk about the U.S. interest rate outlook and how financial advisors can be prepared for a change in the Federal Reserve’s rate policy.
“The Fed has always said ‘we will raise rates when the data justifies it,’” said Tucker. “People hear the first part of the message and lose the second part of the message. “
Tucker noted that short-term bonds are vulnerable if the Fed decides to raise rates, but longer-dated rates are less about the Fed and more about other factors, including inflation and economic growth.
One idea highlighted is the iShares Floating Rate Bond ETF (NYSEArca: FLOT). Floating rate notes, like the name suggests, have a floating interest rate. Specifically, the notes’ have a so-called reset period with interest rates tied to a benchmark, such as the Fed funds, LIBOR, prime rate or U.S. Treasury bill rate.
Watch the video below to see the full interview.
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