In contrast, bond funds with long durations will pull back as interest rates rise. The benchmark 10-year Treasury yield rose 13 basis points to 2.24% Friday on speculation that the Federal Reserve would hike rates after the better-than-expected February jobs report.
Investors should be aware that they are still exposed to credit risk as the majority of underlying bank loan holdings are rated speculative-grade or junk. However, an actively managed bank loan ETF option could provide investors with better exposure as a manager is more freely able to weave in and out of the fixed-income market. [Active ETFs Help Drive First Trust’s Growth]
On the flip side, investors are rewarded with higher yields. For example, BKLN has a 4.04% 30-day SEC yield, SNLN has a 4.04% 30-day SEC yield, SRLN has a 4.06% 30-day SEC yield and FTSL has a 4.49% 30-day SEC yield.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.