Bond funds hold a collection of debt with varying maturities, buying and selling debt securities to maintain their short-, intermediate- or long-term strategy.
When it comes to bond ETFs, investors should look at the duration, or a bond fund’s measure of sensitivity to gauge their investment’s exposure to changes in interest rates – a higher duration means a higher sensitivity to shifts in rates.
Investors looking for short-term credit ideas can consider the iShares 1-3 Year Credit Bond ETF (NASDAQ: CSJ). CSJ tracks short-term U.S. investment-grade credit, including corporate, sovereign, supranational, local authority and non-U.S. agency bonds with remaining maturities between one and three years.
“Beginning no sooner than August 1, 2018, but no later than October 4, 2018, the fund will seek to track a new underlying index, the ICE BofAML 1-5 Year US Corporate Index, and will cease to track the Bloomberg Barclays U.S. 1-3 Year Credit Bond Index,” according to iShares.
Calling On CSJ
The $10.59 billion CSJ, which debuted 11 and a half years ago, holds nearly 900 bonds. The fund has an effective duration of 1.95 years and a 30-day SEC yield of 3.07%. Over 94% of CSJ’s holdings have maturities of one to two years or two to three years.