Lean on Active Bond ETFs as Fed Threads Needle | ETF Trends

The bond market may have jumped the gun somewhat on rate cut excitement. The November jobs report that dropped Friday showed an unexpected decrease in the unemployment rate to 3.7%. That’s less than the expected 3.9%. Nonfarm payrolls rose by 199,000 compared to the expected 190,000, with the former also higher than October’s total of 150,000. While the Fed has cooled inflation significantly, a reminder that “higher for longer” still looms may speak to the case for active bond ETFs as a solution.

Bonds have been an exciting place to be for much 2023. They’ve done especially well compared to 2022 following the Fed’s rapid rate hikes. That optimism had grown following repeated pauses by the Fed on further hikes, suggesting that instead, cuts were on the way. Even Fed Chair Jerome Powell’s warning that markets had been “premature” thinking about rate cuts may have seemed more like signaling than an earnest message.

See more: “T. Rowe Price’s Active ETF Suite Hits $2 Billion AUM

Whatever the signals sent by the Fed and tight economic news, investors may want cover in case cuts are delayed. Bond investors who had already priced in rate cuts specifically may want to reassess and consider how allocating to active bond ETFs can help.

Eyeing Active Bond ETFs

Active ETFs have picked up quite a bit of attention this year, with notable flows relative to their smaller AUMs, in large part thanks to their adaptability. Compared to their passive counterparts, active strategies can adjust more quickly. They offer attentive, seasoned management, too. Active bond ETFs with the right remit can move in and out of specific bonds, or even broad bond types, as the Fed walks the rate tightrope.

T. Rowe Price offers a suite of active ETFs that may be worth considering. The firm’s roster includes strategies like the T. Rowe Price QM U.S. Bond ETF (TAGG).

For more news, information, and analysis, visit the Active ETF Channel.