While investors look to further interest rate guidance from the Fed this week, maintaining position on the short-end of the yield curve will likely prove beneficial. The Neuberger Berman Short Duration Income ETF (NBSD ) appears well-positioned for current rates as well as any potential rate cuts this year.
The Fed approach to interest rates in the current inflation cycle has been one of absolute caution. Powell and the FOMC remain very data-dependent and driven in their fight against inflation. The regulatory body waits for specific markers of stress or easing within labor and inflation measures before taking action. That caution remains on display this year, with Federal Reserve Chair Jerome Powell consistently reiterating the Fed’s willingness to hold rates steady.
It’s a position that’s made the Fed a target of the current administration. As tariff impacts fracture across the U.S. economic framework, the pressure on the Fed increases. Worries about inflation impacts of tariffs — as well as the very measurable GDP contraction in the first quarter on tariff-buying fears — hang over markets and the regulatory body. It puts the Fed in a lose-lose situation, weighing the consequences of recession against that of stagflation.
When rate cuts happen this year, they’ll likely come at the cost of pain to consumers and the economy. “Over seven years, the Powell Fed has a track record of waiting to be very sure about the data and then going very fast,” Lael Brainard, former Fed governor and vice chair, recently said, reported by WSJ. “I would imagine if you see a notable deterioration in the labor market, at that juncture the Fed will be prepared to move.”
Staying positioned on the short-end of the yield curve seems particularly prudent this year. Currently, ultra-short durations offer a haven as market and tariff volatility continues. However, when rate cuts begin, moving slightly farther out on the yield curve may prove beneficial. In a rate cutting environment, prices go up on bonds while yields decline. The yield curve, inverted for much of the last three years, will likely normalize. As rates on longer duration bonds rise above those of short-term bonds, longer duration becomes more attractive.
Navigate Uncertain Rates With Actively Managed NBSD
Given the Fed’s abundance of caution and the reality that rate cuts may come as a response to either the onset or worsening of U.S. economic recession, short- and intermediate-bonds appear well-positioned this year. The actively managed Neuberger Berman Short Duration Income ETF (NBSD ) is worth consideration in the current rate environment and as rate cuts begin again. It generated a distribution rate of 5.67% as of March 31,2025. Distribution rate annualizes the most recent distribution and divides by the fund’s NAV.
The fund seeks to generate reliable income while providing an investment-grade, short duration profile for portfolios. Short-term bonds often prove appealing for their reduced rate risk in challenging environments. In addition, investment-grade bonds generally carry a low credit risk. Combining the two creates reliable income potential for portfolios when market volatility and uncertainty rise.
NBSD invests across a variety of sectors and bond types, including fixed- and floating-rate investment-grade bonds, both foreign and domestic. These can include asset- and mortgage-backed securities, collateralized debt obligations (including CLOs), and credit risk transfer securities.
The management team considers qualitative as well as quantitative factors when selecting securities. They search for underpriced bonds, both on a sector level as well as within peer groups. While 80% of the fund comprises investment-grade bonds, up to 20% may be below investment-grade. When investing in these junk bonds, the fund managers seek issuers in relatively strong financial health and whose credit scores may increase.
NBSD carries an expense ratio of 0.35%.
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