Defined-Maturity Bond ETFs: A Silver ‘Bullet’ for Rising Rates?

ETF Trends

Bond ETFs with defined maturity dates just like individual bonds are gaining popularity with investors as interest rates march higher.

For example, Guggenheim Investments manages a family of BulletShares ETFs with maturity dates spanning from 2013 to 2022. The ETFs cover investment-grade and high-yield corporate bonds. [More Target-Date Bond ETFs Provide Rising Rate Hedge]

The funds enable investors and advisors to implement date-sensitive investment strategies such as building a laddered bond portfolio, filling gaps in existing portfolios, obtaining year-specific yield-curve exposure and managing future cash flow needs, according to Guggenheim Investments. [BulletShares Bond ETFs Gaining Momentum]

The ETFs “satisfy the needs of both individual issue and bond fund investors,” writes Michael Fabian at Nasdaq.com.

The ETFs make interest payments, and when the funds mature, all assets are distributed to shareholders.

BlackRock’s iShares also manages target-maturity bond ETFs.

“Practical uses within a portfolio can vary, and include the basic buy-and-hold to maturity approach, or even a more sophisticated yield curve positioning strategy,” Fabian wrote. “Other uses can even include opportunistically shortening or lengthening duration, while staying in the same fund family to take advantage of prevailing interest rate fluctuations.”

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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