The annual inflation rate in the United States decelerated slightly to 6.4% in January, from 6.5% in December. Inflation figure came in higher than market forecasts of 6.2%. Still, it marked the lowest reading since October of 2021.

Compared to the previous month, the CPI rose 0.5%, the most in three months and following a 0.1% increase in December. Economists surveyed by Dow Jones expected an increase of 0.4%, as quoted on CNBC.

If this was not enough, retail sales in the United States increased 3% sequentially in January of 2023, the biggest increase since March of 2021 and way above market forecasts of a 1.8% rise. The reading showed American consumers continued to spend due to upbeat labor market and easing inflation. January gains came after a 1.1% drop in December.

Treasury yields rose following higher-than-expected inflation and retail sales data as these triggered the speculation that the Fed may act hawkish in the coming days. In any case, the jobs data too came in at upbeat, giving the Fed a leeway to act freely on the monetary policy tightening issue.

“The still-high outright level of inflation combined with the state of the labor market should add credence to the ongoing tightening (and no 2023 cuts) narrative,” BMO’s Ben Jeffery said in a note, as quoted on CNBC.

The benchmark 10-year U.S. treasury yield was 3.72% at the start of the ongoing week. But the yield shot up to 3.81% after the release of those two afore-mentioned economic data points. Against this backdrop, below we highlight a few ETFs that are designed to fight rising rates.

ETFs in Focus

Advocate Rising Rate Hedge ETF

The Advocate Rising Rate Hedge ETF is a multi-asset ETF that seeks to generate capital appreciation during periods of rising long term interest rates, specifically interest rates with maturities of five years or longer.

The fund primarily invests in a combination of: U.S. Treasury securities; money-market funds; forwards, futures or options on various currencies; long and short positions on the short and long-end of the Treasury or swap yield curve via futures, swaps, forwards and other over-the-counter derivatives; long and short positions on equity indexes and/or sector ETFs; and commodity futures and options. The fund charges 85 bps in fees.

Simplify Interest Rate Hedge ETF (PFIX Quick QuotePFIX - Free Report)

The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and to benefit from market stress when fixed income volatility increases, while providing the potential for income.

The fund holds a large position in over-the-counter (OTC) interest rate options intended to provide a direct and transparent convex exposure to large upward moves in interest rates and interest rate volatility. The fund charges 50 bps in fees.

FolioBeyond Rising Rates ETF (RISR Quick QuoteRISR - Free Report)

The FolioBeyond Rising Rates ETF is an actively managed exchange-traded fund that seeks to provide protection against rising interest rates while generating current income under stable interest rates. The expense ratio of the fund is 1.01%. The fund yields 4.77% annually.

Fidelity Dividend ETF For Rising Rates (FDRR Quick QuoteFDRR - Free Report)

The underlying Fidelity Dividend Index for Rising Rates reflects the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields. The fund charges 29 bps in fees.

ProShares Equities For Rising Rates ETF (EQRR Quick QuoteEQRR - Free Report)

The underlying NASDAQ U.S. Large Cap Equities for Rising Rates Index seeks to provide relative outperformance during periods of rising U.S. Treasury interest rates, as compared to traditional U.S. large-cap indexes, such as the S&P 500. The fund charges 35 bps in fees and yields about 2.12% annually.