Larger bond ETFs typically hold a basket of bond securities with varying maturities and re-allocates once a bond matures. Many ETFs come with an effective or average duration that measures the fund’s sensitivity to changes in interest rates. For example, if a hypothetical ETF has a 3 year effective duration, the fund would see its price dip 3% if interest rates were to rise 1%.
The iBonds suite now includes 14 corporate, four corporate ex-financials, and six muni term maturity ETFs, according to the iShares statement.
Each iBond ETF holds a portfolio of bonds that mature in a specified year, so you can use them to target and manage interest rate risk as you would with a portfolio of individual bonds, according to iShares.
ETF Trends editorial team contributed to this post.