The age of active fixed income may really be here. With the Fed holding off on further rate cuts amid rising uncertainty, active adaptability in bonds may be ready to step up for investors. Specifically, new government policies pose a degree of unpredictable risk that merits adding short-term exposure. An actively managed short duration bond ETF like TBUX, for example, could offer just the right mix of attributes to serve the current moment.
See more: As Fed Holds Rates Steady, Active Fixed Income Has Its Moment
The T. Rowe Price Ultra Short-Term Bond ETF (TBUX ) charges just 17 basis points for its services. The strategy provides exposure to a diversified group of investment-grade debt securities with an effective duration of 1.5 years or less. Specifically, the ETF’s managers actively invest in corporate and government securities. That includes municipal bonds, money market securities, and bank obligations. The active short duration bond ETF’s managers overweight shorter-duration bonds specifically.
The active investment approach has helped it produce a 4.82% 30-day SEC standardized yield as of January 31, per T. Rowe Price data. The strategy has returned 6.37% over the last one-year period as of December 31. That has beaten its benchmark by just about 1% total.
Active fixed income ETFs like TBUX could be just what the doctor ordered. The U.S. debt picture and its impact on Treasurys remains a point of concern. And with rates set to hold where they are for a few more months, a shorter-duration approach could boost portfolios. That applies, in particular, to corporate bonds. Should high valuations presage a recession or other drop-off for corporates, shorter-duration could appeal.
TBUX offers a flexible, active short duration bond ETF approach to that space to add to portfolios. For those looking to refresh their bond exposures, this fund can serve as a satellite ETF role to watch for investors.
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