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Short-term, Money Market Bond ETFs Reveal Rising Rate Expectations


Yields on ultra-short-term debt and bond-related exchange traded funds are rising, revealing increased expectations of a Federal Reserve rate hike.

For example, the PIMCO Enhanced Short Maturity ETF (MINT) has a 0.62% 30-day SEC yield and a 0.45 year duration. The Guggenheim Enhanced Short Duration Bond (GSY) has a 0.34% 30-day SEC yield and a 0.47 year effective duration. The SPDR SSgA Ultra Short Term Bond ETF (ULST) has a 1.59% 30-day SEC yield and a 0.27 year duration. The iShares Short Maturity Bond ETF(NEAR) has a 1.09% 30-day SEC yield and a 0.68 year duration.

Additionally, short-duration Treasury bond ETFs are also showing rising rates. For instance, the iShares Short Treasury Bond ETF (SHV) has a 0.42 year duration and a 0.13% 30-day SEC yield. [Rising Rate Preparation With Short-Term Bond ETFs]

Implied yields on federal-fund futures that expire in July 2015 were at 0.28%, compared to 0.255% at the end of last week and 0.185% in October, reports Liz Capo McCormic for Bloomberg.

The benchmark Federal rate has been held in a range of zero to 0.25% since 2008.

Federal Reserve Chair  Janet Yellen “went out of her way to emphasize that they could hike at any meeting and that it’s data-dependent, so they could do it sooner if there is faster progress,” Brian Smedley, an interest-rate strategist at Bank of America Corp., said in the article.. “The market is pricing in high odds of a mid-2015 hike.”

Yellen said that the Fed will take a “patient” approach. However, market observers are wary that this was a hint of a increased rate hike talks over the next couple of meetings. Fed Bank of San Francisco President John Williams also said that policy makers’ patient approach hints at a move toward raising rates.

In response to rising rate expectations, the actively managed short-term bond ETFs have already registered a slight decline of about 0.1% over the past three months – yields and bond prices have an inverse relationship, so a falling price corresponds with a rising yield. [Investors Dumping Short-Term Bond ETFs]

PIMCO Enhanced Short Maturity ETF


For more information on the fixed-income market, visit our bond ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.