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Fixed income investors continue to grapple with an uncertain macro environment, dominated by higher-for-longer interest rates and a new-look U.S. Federal Reserve, in which rate hikes may be forthcoming. Rather than make a directional bet on interest rates to combat duration risk, consider floating-rate ETFs, a compelling option.
Treasury yields surge as U.S.-Iran tensions lift oil prices. These ETFs could help investors navigate a rising-rate environment.
While the Federal Reserve left interest rates unchanged at the latest meeting, investors increasingly speculate that rate hikes are on the table in 2026.
Invesco Senior Loan ETF (BKLN) doesn't appear compelling enough due to high expenses and compressed credit spreads. BKLN's ~0.65% expense ratio persistently drags performance, especially for a passive, index-tracking vehicle. Current credit spreads for BKLN's predominantly single-B and BB-rated holdings are fairly compressed, offering insufficient premium for the risk.
The odds of rate hikes are rising as inflation stays hot. Traditional bond ETFs will struggle, but inflation-protected bond ETFs could thrive.
Given the escalating geopolitical uncertainty and the threat of inflation, many advisors and investors have been keeping a close eye on the Federal Reserve. The latest meeting, which concluded on Wednesday, June 17, was especially interesting, given that it was Kevin Warsh's first meeting as chairman of the Fed.
The Invesco Senior Loan ETF (NYSEARCA:BKLN) sits at $20.51 with $7.1 billion in net assets, and income investors hold BKLN for one reason: a monthly distribution sourced from floating-rate loans to leveraged borrowers.
Not even halfway through 2026, and the software investing story is already divided into two distinct chapters. Earlier this year, the SaaS-pocalypse spooked private credit markets and investors holding shares of publicly traded software companies.