For investors seeking momentum, iShares Floating Rate Bond ETF FLOT is probably on radar now. The fund just hit a 52-week high, and is up 0.6% from its 52-week low price of $50.73/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
This fund offers exposure to U.S. floating rate bonds, whose interest payments adjust to reflect changes in interest rates. Holding 606 securities, the fund has an average maturity of 1.99 years and effective duration of 0.16 years. In terms of credit quality, the ETF can be considered a relatively safe option for investors as it focuses on better quality notes with nearly 82% of them rated A or higher. The product charges 20 bps in annual fees from investors (see: all the Investment Grade Corporate Bond ETFs here ).
Why the Move?
The floating corner of the bond investing has been an area to watch lately given the spike in Treasury yields. The 10-year Treasury yields are trading near the highest level since 2014. The Fed expects inflation to move higher, paving the way for aggressive rates hike. Additionally, the central banks outside the United States are joining the Federal Reserve in monetary policy tightening. Floating rates ETFs protect investors from capital erosion in a rising rate environment.
More Gains Ahead?
It seems that FLOT might remain strong given a weighted alpha of 0.60% and a 20-day volatility of 0.62% . As a result, there is definitely still some promise for investors who want to ride on this surging ETF a little further.
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