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Steady As Rates Rise

With rates rising again, fixed-income investors may want to reconsider interest-rate hedged bond exchange traded fund strategies to diminish the negative effects of rate risk while still maintaining robust yield-generating opportunities.

Even as the Federal Reserve has boosted borrowing costs twice this year, HYZD has been mostly steady in 2018, posting a modest year-to-date gain.

“HYZD could offer several positive attributes to the portfolio in the context of a rising rate environment. In addition to the high income component, the offsetting interest rate exposure of the short positions in nominal Treasury Bonds could offer a significant reduction in the interest rate risk of the overall portfolio,” said WisdomTree.

HYZD has an effective duration of -0.14 years and a 30-day SEC yield of 5.27%, indicating that while the fund reduced rate risk, it does not rob investors of income.

For more information on the fixed-income space, visit our bond ETFs category.