Against the backdrop of increasing borrowing costs, investors can utilize floating-rate, high-yield, senior loan exchange traded funds to hedge against a rising interest rate environment. That includes the actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN).

Due to their floating rate component, bank loans are seen as an attractive alternative to traditional high-yield corporate bonds in a rising rate environment. Bank loan securities allow their interest rate to shift, or float, along with the rest of the market, whereas a fixed interest rate stays constant until maturity.

Senior loans, bank loans or leveraged loans may act as an attractive alternative. A Senior loan is a private loan a firm takes from a bank or a syndicate of lenders. The loans are backed by the borrowers’ assets, which act as collateral. If the borrower defaults, lenders have a senior claim on the defaulters’ assets

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