Short-term Treasury yields are highly sensitive to changes in the Federal Reserve’s interest rates. The central bank has hiked rates three times last year and is expected to raise interest rates several times this year. Investors can also consider the iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY).
“The rise in short-term U.S. rates reflects multiple market crosscurrents. The U.S. Treasury market is catching up with the Federal Reserve’s (Fed’s) own projection of rate hikes in 2018,” said BlackRock. “This reassessment is largely driven by stronger growth expectations tied to fiscal stimulus. Fed Chair Jerome Powell’s upbeat appraisal of the economy has reinforced expectations for three to four rate hikes this year.”
Year-to-date, investors have added $1.52 billion to SHV and nearly $58 million to SHY.
For more information on Fixed-Income ETFs, visit our Fixed-Income category.