Domestic Investors Taking on More Government Debt

Related: An ETF That Taps Into Closed-End Funds for High Yields

Risk-On Fixed-Income ETF

On the opposite spectrum, investors loading up on safe-haven government debt can still capitalize on high-yield ETFs to take advantage of short-term interest rate hikes that are to be expected as the Federal Reserve hints at further tightening with respect to monetary policy. One such ETF is the ProShares High Yield—Interest Rate Hdgd (BATS: HYHG).

HYHG tracks the performance of the Citi High Yield (Treasury Rate-Hedged) Index and allocates 80% of its total assets in high-yield bonds and short positions in Treasury Securities in order hedge against rising rates. Because HYHG invests in high-yield bonds, there is credit risk associated with the higher yield since the fund invests in corporate issues that are less than investment-grade. By targeting a duration of zero, HYHG offers less interest rate sensitivity versus its short-term bond peers.

For more trends in fixed income, visit the Fixed Income Channel.