Fixed-income investors are searching far and wide to adapt their portfolios to a rising rate environment.
Perhaps surprisingly, U.S. Treasury yields have not jumped as much as previously anticipated this year. While the Federal Reserve raised interest rates in March, possibly setting the stage for more rate hikes later this year, the central bank sounded a somewhat dovish tone.
Plus, with stocks tumbling the past few days, some market observers expecting volatility to return and still slow economic growth, the Fed may not have the room to boost borrowing costs as rapidly as previously expected.
That scenario has been a boon for exchange traded funds such as the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT). There are some obvious fundamental factors that bode well for U.S. debt ETFs, namely a slew of negative interest rate policies throughout the developed world, which make the low yields on U.S. bonds look all the more attractive.