Wall Street has been on choppy ride since the start of 2022 due to rising rate worries and geopolitics. The 10-year U.S. Treasury yield hit a multi-year high on Mar 22 on Federal Reserve Chair Jerome Powell’s comments on rate hikes.

Powell on Monday said, “inflation is much too high,” in a speech for the National Association for Business Economics, as quoted on CNBC. The central bank chief stressed that the Fed would continue to hike interest rates until inflation comes under control and those hikes could be more aggressive than forecast, the CNBC article noted.

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” said Powell. As a result, rates started surging. Goldman Sachs on Monday raised its forecast to 50 basis point hikes at the May and June Fed meetings, the CNBC article reported.

Higher inflationary expectations emanating from supply chain disruptions as well as higher crude prices made Fed members comfortable with this kind of aggressive rate hike cycle. Notably, the Fed had enacted its first rate hike this month since the start of the pandemic.

iShares 20+ Year Treasury Bond ETF (TLT Quick QuoteTLT - Free Report) lost about 13.1% this year (as of Mar 21, 2022). No wonder, in the face of rising bond yields, investors might be fearing fixed-income investing as yields and bond prices are inversely related. But there are fixed income ways that would help investors mitigate such threats yet emerge profitable. Below we highlight a few of them:

ETFs in Focus

iShares Floating Rate Bond ETF (FLOT Quick QuoteFLOT - Free Report)

Floating rate notes are investment grade bonds that do not pay a fixed rate to investors but have variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread depending on the credit risk of issuers.

Since the coupons of these bonds are adjusted periodically, they are less sensitive to an increase in rates compared to traditional bonds. FLOT has an effective duration of 0.10 years and thus presents minimal interest rate risks.

Highland/iBoxx Senior Loan ETF

Senior loans are issued by companies with below investment grade credit ratings. In order to make up for this high risk, senior loans normally have higher yields. Since these securities are senior to other forms of debt or equity, these give protection to investors in any event of liquidation. As a result, default risk is low for such bonds, even after belonging to the junk bond space.

Senior loans are floating rate instruments and provide protection from rising interest rates. In a nutshell, a relatively high-yield opportunity coupled with protection from the looming rise in interest rates should help the fund to perform better. SNLN could thus be a good pick for the upcoming plays. It yields around 3.01% annually.

Vanguard Short-Term Bond ETF (BSV Quick QuoteBSV - Free Report)

Higher rates might lead to huge losses for investors who do not hold bonds until maturity. As a result, a short-duration bond ETF like BSV acts as a better hedge to rising rates. U.S. government bonds take about 66.95% of the fund.  The average maturity and effective duration are 2.8 years and 2.9 years, respectively. It charges 5 bps in annual fees.

The WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD Quick QuoteAGZD - Free Report)

The underlying Bloomberg Barclays Rate Hedged U.S. Aggregate Bond Index, Zero Duration seeks to combine exposure to the Barclays US Aggregate Bond Index with a structured interest rate overlay to target a duration of zero years. Such technique of interest-rate hedging makes the fund well positioned to play in a rising rate environment. The fund charges 23 bps in fees and yields 1.55% annually.