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Floating Rate Bond ETF (FLOT) Hits New 52-Week High
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For investors seeking momentum, iShares Floating Rate Bond ETF (FLOT - Free Report) is probably on radar. The fund just hit a 52-week high and is up 2.2% from its 52-week low price of $49.63/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea of where it might be headed:
FLOT in Focus
iShares Floating Rate Bond ETF offers exposure to U.S. floating rate bonds, whose interest payments adjust to reflect changes in interest rates. It focuses on better quality notes, with 85% of them rated A or higher, an average maturity of 1.64 years and an effective duration of 0.06 years. iShares Floating Rate Bond ETF charges 15 bps in annual fees (see: all the Investment Grade Bond ETFs here).
Why the Move?
The floating rate bond has been an area to watch lately, given the rise in yields. Investors are worried that inflation and a strong U.S. economy could put the Fed on pace for more interest rate hikes. This has pushed the yields higher lately.
Floating rate bonds are investment grade and 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. Unlike fixed-coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising rate environment.
More Gains Ahead?
Currently, FLOT might remain strong given a weighted alpha of 0.60 and 20-day volatility of 1.70%. As a result, there is definitely still some promise for risk-aggressive investors, who want to ride on this surging ETF.
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Floating Rate Bond ETF (FLOT) Hits New 52-Week High
For investors seeking momentum, iShares Floating Rate Bond ETF (FLOT - Free Report) is probably on radar. The fund just hit a 52-week high and is up 2.2% from its 52-week low price of $49.63/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea of where it might be headed:
FLOT in Focus
iShares Floating Rate Bond ETF offers exposure to U.S. floating rate bonds, whose interest payments adjust to reflect changes in interest rates. It focuses on better quality notes, with 85% of them rated A or higher, an average maturity of 1.64 years and an effective duration of 0.06 years. iShares Floating Rate Bond ETF charges 15 bps in annual fees (see: all the Investment Grade Bond ETFs here).
Why the Move?
The floating rate bond has been an area to watch lately, given the rise in yields. Investors are worried that inflation and a strong U.S. economy could put the Fed on pace for more interest rate hikes. This has pushed the yields higher lately.
Floating rate bonds are investment grade and 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. Unlike fixed-coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising rate environment.
More Gains Ahead?
Currently, FLOT might remain strong given a weighted alpha of 0.60 and 20-day volatility of 1.70%. As a result, there is definitely still some promise for risk-aggressive investors, who want to ride on this surging ETF.