“The U.S. on a standalone basis has exited this new normal, is now find a higher growth equilibrium,” said Bloomberg Opinion columnist Mohamed El-Erian.
Rate-Hedged Fixed-Income ETFs Rise with Yields
Today’s strength in the benchmark yields hasn’t stopped corporate bonds with rate-hedged strategies like the ProShares Investment Grade—Intr Rt Hdgd (BATS: IGHG) and Xtrackers Inv Grd Bd Intst Rt Hdg ETF (BATS: IGIH) from posting gains. IGHG was up 0.85% today and and IGIH was up 1.51%.
IGHG investment seeks investment results that track the performance of the Citi Corporate Investment Grade (Treasury Rate-Hedged) Index, which is comprised of long positions in USD-denominated investment grade corporate bonds issued by both U.S. and foreign domiciled companies and short positions in U.S. Treasury notes or bonds. IGIH tracks the Solactive Investment Grade Bond – Interest Rate Hedged Index, which is comprised of long positions in U.S. dollar-denominated investment-grade corporate bonds and short positions in U.S. Treasury notes or bonds.
IGHG and IGIH could continue to benefit should the Fed stay the course with their rate rises despite any instances of U.S. President Donald Trump using the bully pulpit to affect rates. The president voiced his concern for rising rates, stating that he was “not happy” with the latest increases.
“We as an administration absolutely support the independence of the Fed, and the president has made it clear that this is the Fed’s decision,” said Treasury Secretary Steven Mnuchin “The market expects interest rates to keep going up. So, the only question is how far and for how long? And we think the Fed will be very careful in managing the economy.”
For more trends in fixed income, visit the Fixed Income Channel.