We continue to favor low duration in our fixed income portfolios given the extent of the rally in the U.S. Treasuries post-Brexit. The iShares Aggregate Bond ETF AGG has risen in duration from 3.7 years in 2008 to 5.5 years so short duration ETFs (SHY, GSY, MINT, NEAR) are worth a look. We expect that higher yields will be beneficial for floating rate bonds (FLOT, FLTR, FLRN) and leveraged loans (BKLN, SRLN) and negative for bonds with prepayment risk, mainly higher coupon mortgages. Interest-rate hedged strategies (LQDH, THHY) could be an option for some investors to reduce rate sensitivity while maintaining bond exposure.
Deepika Sharma is the managing director of investments and portfolio manager at Astor Investment Management, a participant in the ETF Strategist Channel.
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All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.
At the time of writing, Astor Investment Management held GSY, BKLN, AGG, NEAR and SRLN among its universe of ETFs included in its multi-asset portfolios. Astor Investment Management is a fundamentally-driven quantitative asset manager that seeks to empower clients with economics-based tools and portfolio solutions to reduce risk and help attain investment goals. Contact Astor at 1-800-899-3230 or [email protected]. For a complete list of relevant disclosures, click here. 309161-488