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The iShares Treasury Floating Rate Bond ETF (TFLO - Free Report) is probably a suitable pick for investors looking for momentum. TFLO hit a 52-week high and is up from its 52-week low price of $50.25/share.
Let’s take a look at TFLO and its near-term outlook to gauge where it might be headed.
TFLO in Focus
The iShares Treasury Floating Rate Bond ETF seeks to track the investment results of an index composed of U.S. Treasury floating rate bonds. It has AUM of $846.2 million and charges an expense ratio of 15 basis points.
Why the Move?
Market participants continue to grapple with rising Treasury yield and the Fed’s aggressive stance on interest rate hikes to control inflation levels. Fed Chairman Jerome Powell has indicated aggressive rate hikes this month. In this regard, Powell mentioned at the International Monetary Fund Debate on the Global Economy that it will be “appropriate in my view to be moving a little more quickly,” as stated in a CNBC article. He also mentioned that “I also think there is something to be said for front-end loading any accommodation one thinks is appropriate. ... I would say 50 basis points will be on the table for the May meeting.”
This has raised the appeal for floating rate bonds. Since the coupons of these bonds are adjusted periodically, they are less sensitive to an increase in rates compared with traditional bonds. This is making funds like TFLO an impressive investment option.
More Gains Ahead?
It seems like the iShares Treasury Floating Rate Bond ETF will remain strong, with a positive weighted alpha of 0.40, which gives cues of a further rally.
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