For investors looking for dynamism, iShares Floating Rate Treasury Bond ETF TFLO is probably on the radar. The fund just hit a 52-week high and is up 1% from its 52-week low of $50.25/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and its near-term outlook to get a better idea of its direction:
TFLO in a nutshell
iShares Treasury Floating Rate Bond ETF provides exposure to floating rate US Treasury bonds, whose interest payments adjust to reflect changes in interest rates. It has an effective duration of 0.01 year and an average maturity of 0.73 year. The product charges a 15 basis point annual fee (see: all government bond ETFs here).
Why the move?
Floating rate bond has been an area to watch lately, given the rise in interest rates. The Fed adopted an aggressive monetary policy to curb inflation, causing interest rates to soar. Floating rate notes are investment grade and do not pay a fixed rate to investors, but have variable coupon rates which are often linked to an underlying index (such as LIBOR) plus a variable spread depending on risk credit from issuers. The coupons of these bonds being adjusted periodically, they are less sensitive to a rise in rates compared to traditional bonds. Unlike fixed coupon bonds, these do not lose value when rates rise, making them ideal bonds to protect investors against capital erosion in a rising rate environment.
More wins to come?
Currently, TFLO could remain strong given a weighted alpha of 0.40 and a 20-day volatility of 0.44%. As a result, there is certainly still promise for risk-aggressive investors who want to take advantage of this booming ETF.
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iShares Treasury Floating Rate Bond ETF (TFLO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.