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Floating Rate 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 now. The fund just hit a 52-week high and is up about 1.6% from its 52-week low price of $50.07/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 on where it might be headed:

FLOT in Focus

The fund looks to track the Bloomberg Barclays US Floating Rate Note < 5 Years Index. This consists of U.S. dollar-denominated, investment-grade floating rate bonds with remaining maturities between one month and five years. It charges investors 20 bps in annual fees (see all investment grade corporate bond ETFs here).

Why the Move?

Floating rate notes are investment grade bonds that do not pay a fixed rate to investors but have variable coupon rates 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.

With the strengthening prospect of a March rate hike, U.S. Treasury yields are on an uptrend. This explains why investors bet on this floating rate bond ETF.

More Gains Ahead?

It seems that FLOT might see some more strength ahead given a positive weighted alpha of 1.20. A positive weighted alpha hints at more gains. As a result, there is some promise for investors who want to ride on this surging ETF a little further.

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