Rate-Hedged Fixed-Income ETF Moves
The rise in the benchmark yields may have caused a move to fixed-income ETFs with rate-hedged strategies like the WisdomTree Interest Rt Hdg Hi Yld Bd ETF (NasdaqGM: HYZD). HYZD rose 0.53% as of 12:30 p.m. ET, and is up 2.86% year-to-date and 5.73% the past year.
HYZD seeks to track the price and yield performance of the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained, Zero Duration Index, which provides long exposure to the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained Index while seeking to manage interest rate risk through the use of short positions in, you guessed it, U.S. Treasury securities. The majority of the fund’s total assets will be invested in the component securities of the index and investments that have economic characteristics that are similar in nature.
“We finally have a real interest rate, not one that’s just zero,” said Craig Birk, chief investment officer of Personal Capital. “The Fed is still saying that they will likely raise rates slowly and steadily but the market seems to be betting they will stop sooner.”
For more trends in fixed income, visit the Fixed Income Channel.