“Short term high yield bond funds help investors reduce their interest rate risk, but they have shortcomings. If you’re looking for a potentially better solution to rising rates, consider an interest rate hedge bond ETF like HYHG,” according to ProShares research.
HYHG, which is over five years old, “targets zero interest rate risk by including a built-in hedge against rising rates that uses short positions in U.S. Treasury futures,” according to ProShares.
HYHG has a 30-day SEC yield of 6.13%, but its net effective duration is just -0.10 years. The ETF returned 1.53% over the past month. Its investment-grade counterpart, IGHG, is up nearly 2% over the same period.
For more information on rising interest rates, please visit our Rising Rates Channel.