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 3.57% from its 52-week low price of $29.67/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

The underlying Bloomberg U.S. Dollar Floating Rate Note < 5 Years Index consists of debt instruments that pay a variable coupon rate, the majority of which is based on the 3-month LIBOR, with a fixed spread. The fund has an average maturity of 1.85 years and a yield to maturity of 6.13%. The product charges 15 bps in annual fees (see: all the Investment Grade Corporate Bond ETFs here).

Why the Move?

Due to the uptick in yields, floating-rate bonds have been an area to watch lately. The probability of the Fed interest rate remaining higher for longer has increased, given persistently high inflation levels, which have pushed the yields higher.

Floating rate bonds, being tied to a benchmark rate plus a variable spread depending on the credit risk of issuers, are adjusted periodically to current market conditions. This makes the bonds less sensitive to interest rate hikes as 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. Additionally, due to less opportunity cost to the bondholders, floating rate bonds also avoid some of the market-place volatility.

More Gains Ahead?

Currently, FLRN might continue its strong performance in the near term, with a positive weighted alpha of 1.5, which gives cues of a further rally.