Fixed income investors betting that a rate hike is imminent should move to the shorter end of the yield curve, which GSY helps with. By moving down the yield curve, short-duration bond ETFs will experience smaller swings in a rising rate environment. For instance, a 1% rise in interest rates would only correspond to modest, if any, losses for ETFs like GSY. [Focus on Short Duration Bond ETFs]
The yield and bond’s price have an inverse relationship, so bond funds with long durations would experience large price drops if rates were to rise. In contrast, short-duration bond funds will experience more muted volatility in case of sudden rate changes.
Guggenheim Enhanced Short Duration ETF
