As government debt yields continue to slide amid trade concerns in the first half of 2018, more investors are willing to accept more risk in order to achieve higher yields in the fixed income space.
“One thing that may hurt the safe haven bid is that the Trump administration backed off its hard stance on China. This could ease trade war tensions, giving a green light for investors to take a more risk‐on approach,” said Kevin Giddis, head of fixed income capital markets at Raymond James.
Related: Fed Meets Inflation Target: What’s Next?
As such, here are three fixed income ETFs for investors who are not averse to risk and looking to ramp up returns in the second half of 2018.
Watch the move in the front of the yield curve, says CIO from CNBC.
1. iShares Short Treasury Bond ETF (NASDAQ: SHV)
When it’s no longer profitable to go long on government debt, the ideal move would be to go the opposite direction–this is where SHV comes into play. As yield curves flatten and an outflux of investor capital leaves the safe havens of government debt, SHV, which tracks the investment results of the ICE U.S. Treasury Short Bond Index, could be in play.
Total return year-to-date: 0.56 percent
Total return, 1 year: 1.06 percent
Total return, 3 years: 0.54 percent
2. ProShares High Yield—Interest Rate Hdgd (BATS: HYHG)
The Federal Reserve continues to remain hawkish, particularly if the forthcoming economic data in the second half of 2018 warrants more interest rate hikes. If so, then HYHG would be in play as it tracks the performance of the Citi High Yield (Treasury Rate-Hedged) Index to take advantage of high-yield debt.
Total return year-to-date: 1.34 percent
Total return, 1 year: 2.72 percent
Total return, 3 years: 2.42 percent
3. Invesco Senior Loan ETF (NASDAQ: BKLN)
As Giddis alluded to, when investors are willing to take on more risk in order to achieve higher returns, BKLN would more than suffice since it tracks the investment results (of the S&P/LSTA U.S. Leveraged Loan 100 Index. Companies that operate within this debt space carry on greater risks with a higher default rate, but the yields could pay off handsomely.
Total return year-to-date: 1.34 percent
Total return, 1 year:2.25 percent
Total return, 3 years: 2.42 percent
For more investment trends in fixed income, click here.