Fixed-Income Investors Should Bring Flotation Devices in December

FLOT seeks to track the investment results of the Bloomberg Barclays US Floating Rate Note < 5 Years Index, which measures the performance of U.S. dollar-denominated, investment-grade floating rate notes. FLOT invests in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index.

In a time when U.S. equities are experiencing heavy doses of volatility, especially after October’s sell-offs, the case for bond allocation has become more compelling and with more rate hikes forecasted, it should signal to investors that bond ETFs with a floating rate component are worth a look.

“Given the Fed’s latest interest rate hike, interest rates have been moving up,” said Maria Fenech, Investment Manager Support Officer at Calamatta Cuschieri. “Thus, portfolios that contain long-term asset allocations are now experiencing more volatility and hence, a reallocation should be considered.”

For more trends in fixed income, visit the Rising Rates Channel.