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Investment Strategies / Bond Investing
No. of Recommendations: 3
I was curious about the recent movement of some bond ETFs that I follow.
Since market close on Wed, the iShares bond ETFs of various durations have all gone up a bit, with the longer-dated maturities showing the most gain.
Meanwhile, the SPDR floating rate ETF FLRN has declined by about 1.5%.
What might explain the difference in movement?
No. of Recommendations: 1
From Seeking Alpha:
<<Floating rate bonds and fixed rate bonds react differently to interest rate movements, and so market reactions are different too. Fixed rate bonds tend to see cratering prices when rates rise, as investors sell their older, lower-yielding bonds, to buy newer, higher-yielding alternatives. Floating rate bonds, on the other hand, tend to see relatively stable prices, as investors stay put in anticipation of higher yields. FLRN's price decreased by a measly 0.65% in 2022, compared to losses of over 20% for LQD. Other bonds and bond funds saw significant losses too.>>
No. of Recommendations: 1
Thank you MisterFungi.
So given the fact that FLRN fell in the days since Trump’s tariff announcement on 4/2 (unlike the fixed-rate ETFs) perhaps investors are foreseeing interest rates falling as more likely than before.
No. of Recommendations: 1
I personally wouldn't read too much into day-to-day movements in FLRN. As an ETF of short-term floating-rate bonds, it's basically a hedge against rising rates. If you can read the future of interest rates in the short term amidst the present turmoil, you're way better than I am. It, and similar ETFs (e.g., FLOT) could be a good place to hide out right now. But you do your own DD, of course, not listen to some random guy on the Internet. :-)
No. of Recommendations: 1
Since market close on Wed, the iShares bond ETFs of various durations have all gone up a bit, with the longer-dated maturities showing the most gain.
Meanwhile, the SPDR floating rate ETF FLRN has declined by about 1.5%.
I don't know which iShares bond ETFs you looked at, but in terms of uncertainty, corporate bonds fall, and treasuries go up, with yields moving in the opposite direction.
