Ultra-short and short duration bonds remain an attractive choice for investors looking to hedge in safe haven assets as recession risks rise. Delivering competitive yields with less sensitivity to inflation and interest rates compared to longer-duration bonds, they’ve proven popular during periods of market uncertainty and drawdown.
The U.S. economy contracted in the first quarter, falling 0.3% on expectations of a 0.4% growth, reported WSJ. It marks the first time the economy declined since Q1 of 2022, with net exports proving a significant drag on GDP.
As companies scrambled to try and front-run tariffs, imports skyrocketed, reaching levels last seen during lockdown recovery in the second half of 2020. At the same time, consumer spending weakened to 2023 levels, gaining just 1.8%. Concerns of recession and tariff-induced reflation plague investors looking to the second half of the year.
Worried About Recession? Look to Actively Managed TBUX
With much uncertainty in markets about the forward-looking impacts of tariffs, safe haven assets continue to prove popular. Short- and ultra-short duration bonds remain a perennial favorite of investors in an uncertain inflation and rate environment.
The actively managed T. Rowe Price Ultra Short-Term Bond ETF (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. Over three-quarters (78.48%) of the fund’s portfolio was allocated to the U.S. as of March 31, 2025. Other top country exposures included the United Kingdom (3.59%), Canada (2.89%), France (2.46%), and Germany (2.42%).
As the name states, the ETF is truly a low-duration portfolio of ultra-short term bonds that targets a maturity profile of 1.5 years or less. The weighted average maturity of TBUX was 1.28 years as of the end of March. The fund had a weighted average duration of 0.58 years over the same period.
TBUX’s actively managed, diversified portfolio continues to prove popular with investors. The fund received relatively consistent inflows since the beginning of 2024, according to FactSet data. Top sectors by weight included corporate bonds (63.25%), asset-backed securities (24.03%), followed by mortgage-backed securities (8.34%) as of March 31, 2205. The active ETF has a very competitive expense ratio of only 0.17%.
For more news, information, and analysis, visit our Active ETF Channel.
