For investors seeking momentum, SPDR Bloomberg Investment Grade Floating Rate ETF (FLRN Quick QuoteFLRN - Free Report) is probably on radar. The fund just hit a 52-week high and is up 2.4% from its 52-week low price of $29.97/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:

FLRN in Focus

SPDR Barclays Investment Grade Floating Rate ETF tracks the Bloomberg U.S. Dollar Floating Rate Note < 5 Years Index with an average maturity of 1.84 years and an adjusted duration of 0.03 years. It holds 356 securities, with the top-rated bonds (A or higher) accounting for an 88% share. SPDR Barclays Investment Grade Floating Rate 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 bonds ideal for protecting investors against capital erosion in a rising rate environment.

More Gains Ahead?

Currently, FLRN might remain strong given a weighted alpha of 0.90 and 20-day volatility of 1.83%. As a result, there is definitely still some promise for risk-aggressive investors, who want to ride on this surging ETF.