As markets brace for a rising interest rate environment, bond investors should begin to look to alternative investments, such as a strategic interest rate-hedging exchange traded fund, to limit the negative effects or even benefit from rising rates.
Specifically, fixed-income investors can utilize long-short bond strategies to diminish rate risk. The Sit Rising Rate ETF (NYSEArca: RISE) brings an institutional-level interest rate hedging strategy to everyday investors.
RISE is a “strategic interest rate hedging tool that gives investors the opportunity to benefit from the rise in the interest rates of U.S. Treasury notes,” according to Sit Investment Group.[related_stories]
New types of zero duration or negative duration ETFs hold long-term bonds, but they will short Treasuries or Treasury futures contracts to hedge against potential losses if interest rates rise – bond prices have an inverse relationship to interest rates, so rising rates corresponds with falling bond prices.