Investor worries over the current budget bill in Congress and its ballooning effects on the U.S. deficit, alongside recent downgrades to U.S. credit, sent bond yields climbing in response. Short and ultra-short duration bond ETFs like the actively managed T. Rowe Price Ultra Short-Term Bond ETF (TBUX ) continue to benefit from the flight from long duration exposures.
Yields on the 30-year Treasury note rose above 5% once more, as investors weighed potential impacts of the prospective budget bill. It’s estimated that the bill would grow U.S. deficits by another $3 trillion in the next 10 years, reported WSJ. Concerns of unchecked spending already plague bond markets, and resulted in the recent downgrading of U.S. credit by Moody’s.
In a risk averse environment, short and ultra-short duration bonds hold strong appeal for their low interest rate risk. With yields currently back above 4% for 2-year Treasuries, investors can harness elevated yields while minimizing their risk profile. Short and ultra-short bonds also allow investors to put cash to work without taking on excess risk.
Stay Nimble in Short Duration With TBUX
The actively managed TBUX seeks high levels of income and invests in a diversified portfolio primarily of investment-grade, short-term securities. These include Treasuries and government bonds, corporate bonds, asset- and mortgage-backed securities, municipal bonds, money markets, and bank loans. It also invests in foreign debt. Currently, TBUX’s largest country allocations are the U.S. (75.36%), the U.K. (3.85%), Canada (2.95%), and France (2.36%) as of April 30, 2025.
Advisors and investors seeking to hedge in low duration bonds don’t want to miss TBUX. Indeed, the fund has experienced consistent inflows since the beginning of the year, up over $150 million in net flows as of May 19, according to FactSet data.
The fund’s portfolio is comprised of short-term bonds with a targeted maturity profile of 1.5 years or less. The weighted average maturity of TBUX was 1.30 years as of the end of April. The fund had a weighted average duration of 0.61 years over the same period.
TBUX’s actively managed, diversified portfolio continues to prove popular with investors. Top sectors by weight included corporate bonds (62.69%) and asset-backed securities (23.14%), followed by mortgage-backed securities (8.30%) as of April 30, 2205. The fund is also competitively priced for an active strategy, with a management fee of 0.17%.
For more news, information, and analysis, visit our Active ETF Channel.
