Interest Rate-Hedged ETF Gains

With consumer sentiment at a high and the Federal Reserve primed for interest rate hikes through the rest of 2018, the economic landscape provides the perfect breeding ground for an interest-rate hedging strategy, such as the Xtrackers Inv Grd Bd Intst Rt Hdg ETF (BATS: IGIH)

IGIH seeks investment results that track the performance of the Solactive Investment Grade Bond – Interest Rate Hedged Index where a portion IGIH’s total assets will reside in long positions in U.S. dollar-denominated investment-grade corporate bonds. As in the case of IGHG, this strategy effectively eliminates exposure to riskier bonds with fund allocations in investment-grade issues.

The increased sentiment felt throughout the markets could translate into more risk-on investment capital allocations, which could benefit IGIH.

“Confidence is soaring to new heights which makes us bullish on growth and forecasts that this expansion may indeed shatter records for longevity next summer,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

For more trends in fixed income, visit the Rising Rates Channel.