FIBR will invest the majority of assets in U.S. dollar-denominated investment-grade and high-yield fixed-income securities of varying maturities, including U.S. dollar-denominated securities of foreign issuers, U.S. Treasuries, privately-issued securities, and mortgage-backed securities (MBS). The fund may also invest in other ETFs (including other iShares funds), short-term paper, cash and cash equivalents.
For those worried about rate risk, the ETF may also adjust holdings to achieve a target credit spread risk and interest rate risk for the portfolio. For instance, the fund can take short or long positions in U.S. Treasury futures and short positions in U.S. Treasury securities through interest rate swaps, along with other interest rate futures contracts, like Eurodollar and Federal Funds futures.
BlackRock expects the Federal Reserve to embark on interest rate normalization but at a lower pace than in the past.
“The Federal Reserve’s (Fed’s) rate hike earlier this month marks a departure from the glacial pace of tightening in the past two years. By raising rates three months after the December 2016 hike, the central bank introduces the prospect of a more ‘normal’ pace of rate rises, albeit one that is likely less rapid than in the past,” Jeffrey Rosenberg, BlackRock Chief Investment Strategist for Fixed Income, said in a note.
For more information on the fixed-income space, visit our bond ETFs category.