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Rates To Remain Higher For Longer? ETFs to Hedge the Trend
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The interest rates in the United States are expected to remain higher for longer. Despite some officials seeking for a 0.25% hike in rates in June due to a solid labor market and signs of economic resilience, the decision to hold rates steady was unanimous, leading to a pause.
The chances of a rate hike in July are pretty high at the current level. And we may see another rate hike in the rest of 2023, resulting in at least two rate hikes each worth 25 bps in the second half of this year. Fed Chair Jerome Powell reiterated this sentiment, accenting the risk of not taking enough action to tame inflation.
The possibility of raising rates at successive policy meetings is quite likely, given the projected momentum of inflation and the health of the job market. Not only this, many market participants believe that rates are likely to remain high for longer in the U.S. economy.
Key Reason Behind This Rationale: A Strong Job Market & Resilient Economy
Several officials who promoted for a rate hike in June saw the job market as robust and the economy as resilient. With the labor market remaining tight and economic activity showing stronger momentum than expected, they voted for a hike.
Notably, private sector jobs jumped by 497,000 in June, way higher than the 267,000 job gains in May and much better than the 220,000 estimate, per CNBC. Leisure and hospitality led with 232,000 new hires, followed by construction with 97,000, and trade, transportation and utilities at 90,000.
If this was not enough, the Fed officials noted that inflation had not been falling fast enough, further backing the case for a rate hike. Most officials recognized that inflation remained above the Federal Reserve's 2% target.
A Spike in U.S. Treasury Yields
The benchmark U.S. treasury yields jumped to 4.05% on Jul 6 (following upbeat ADP job print), up from 3.86% recorded on Jul 3. The one-month U.S. treasury yield jumped to 5.32% on Jul 6, up from 5.27% recorded on Jul 3. The broader market took a dive on Jul 6 with the SPY, DIA and QQQ losing about 0.8%, 1% and 0.8%, respectively, due to higher rates.
Against this backdrop, investors can hedge the rising rate trend with the below-mentioned ETFs.
ETFs to Hedge Rising Rate Trend
Simplify Interest Rate Hedge ETF (PFIX - Free Report) – up 3.60% on Jul 6
Global X Interest Rate Hedge ETF (RATE - Free Report) – up 3.23% on Jul 6
Foliobeyond Rising Rates ETF (RISR - Free Report) – up 1.5% on Jul 6
WisdomTree Interest Rate Hedged U.S. Aggregate Bond ETF (AGZD - Free Report) – up 0.1% on Jul 6
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Rates To Remain Higher For Longer? ETFs to Hedge the Trend
The interest rates in the United States are expected to remain higher for longer. Despite some officials seeking for a 0.25% hike in rates in June due to a solid labor market and signs of economic resilience, the decision to hold rates steady was unanimous, leading to a pause.
The chances of a rate hike in July are pretty high at the current level. And we may see another rate hike in the rest of 2023, resulting in at least two rate hikes each worth 25 bps in the second half of this year. Fed Chair Jerome Powell reiterated this sentiment, accenting the risk of not taking enough action to tame inflation.
The possibility of raising rates at successive policy meetings is quite likely, given the projected momentum of inflation and the health of the job market. Not only this, many market participants believe that rates are likely to remain high for longer in the U.S. economy.
Key Reason Behind This Rationale: A Strong Job Market & Resilient Economy
Several officials who promoted for a rate hike in June saw the job market as robust and the economy as resilient. With the labor market remaining tight and economic activity showing stronger momentum than expected, they voted for a hike.
Notably, private sector jobs jumped by 497,000 in June, way higher than the 267,000 job gains in May and much better than the 220,000 estimate, per CNBC. Leisure and hospitality led with 232,000 new hires, followed by construction with 97,000, and trade, transportation and utilities at 90,000.
If this was not enough, the Fed officials noted that inflation had not been falling fast enough, further backing the case for a rate hike. Most officials recognized that inflation remained above the Federal Reserve's 2% target.
A Spike in U.S. Treasury Yields
The benchmark U.S. treasury yields jumped to 4.05% on Jul 6 (following upbeat ADP job print), up from 3.86% recorded on Jul 3. The one-month U.S. treasury yield jumped to 5.32% on Jul 6, up from 5.27% recorded on Jul 3. The broader market took a dive on Jul 6 with the SPY, DIA and QQQ losing about 0.8%, 1% and 0.8%, respectively, due to higher rates.
Against this backdrop, investors can hedge the rising rate trend with the below-mentioned ETFs.
ETFs to Hedge Rising Rate Trend
Simplify Interest Rate Hedge ETF (PFIX - Free Report) – up 3.60% on Jul 6
Global X Interest Rate Hedge ETF (RATE - Free Report) – up 3.23% on Jul 6
Foliobeyond Rising Rates ETF (RISR - Free Report) – up 1.5% on Jul 6
WisdomTree Interest Rate Hedged U.S. Aggregate Bond ETF (AGZD - Free Report) – up 0.1% on Jul 6