With inflation higher than expected, advisors are focused on how aggressive the Federal Reserve will need to be to tame it. The U.S. Department of Labor reported on Wednesday that domestic consumer inflation rose 9.1% in the 12 months ended in June, the fastest pace since November 1981. The June increase also surpassed May’s rate of 8.6%, which led the Fed on its aggressive path to raise rates at a faster rate to tamp down inflation.
The Labor Department’s inflation report will likely keep the Fed on track to raise its benchmark interest rate by 0.75 percentage points at its meeting later this month. Treasury yields experienced huge swings after the report was released, with the yield on the 10-year U.S. Treasury note reaching 2.937% in recent trading, down from a recent high of 3.069% immediately after the CPI report and its 2.958% settlement Tuesday.
This is where actively managed bond ETFs can play a role as these core bond managers can leverage their macro expertise to adjust duration. While passive strategies often lack the flexibility to adapt to changing market environments, active bond ETFs can offer the potential to outperform fixed income benchmarks and indexes.
“Navigating the bond market is even more challenging for advisors this year as bonds fall in value,” said Todd Rosenbluth, head of research at VettaFi. “However, the ability to tap into the expertise of experienced managers along with the liquidity benefits of an ETF has been compelling.”
As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed fixed income ETFs, including the T. Rowe Price QM U.S. Bond ETF (TAGG ), the T. Rowe Price Total Return ETF (TOTR ), and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX ).
T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.
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