9 Winning ETF Ways For Those Who Fears Rising Yields

As widely expected, the Fed raised benchmark interest rates by a modest 25 bps to the 0.50–0.75% band. The Fed expressed its confidence in the U.S. economy and forecast three rate hikes in 2017, up from two guided in September.

Alongside, the U.S. central bank upped the median projection for real GDP growth and lowered the same for unemployment in 2016, 2017 and 2019. Projections for the benchmark interest rates for the next three years were also beefed up.

Though the future policy of the Fed is still hazy with Trump’s impending policy framework and still-subdued business spending, Treasury yields were on an uphill ride. The two-year benchmark Treasury yield jumped 10 bps from the day earlier to 1.27% on December 14, marking a seven-year high. The yield on the 10-year Treasury note rose 6 bps to 2.54%. Most regular bond ETFs were in the red on December 14.

Against such a backdrop, investors might be looking for ways to save their portfolio from the ills of rising rates. For them, we highlight some ETF choices that might be used for gains if the Fed speeds up hikes next year.

WisdomTree Barclays US Aggregate Bond Zero Duration ETF (AGZD - Free Report)

The fund employs a long position in bonds representing the Barclays US Aggregate Bond Index and a short position in Treasury securities to target zero duration. This zero duration strategy makes you steer clear of rising rate risks.

Highland/iBoxx Senior Loan ETF (SNLN - Free Report)

Senior loans are issued by companies with below investment grade credit ratings. In order to make up for this high risk, senior loans normally have higher yields. Since these securities are senior to other forms of debt or equity, these give protection to investors in any event of liquidation. As a result, default risk is low for such bonds, even after belonging to the junk bond space.

Moreover, senior loans are floating rate instruments and provide protection from rising interest rates. In a nutshell, a relatively high-yield opportunity coupled with protection from the looming rise in interest rates should help the fund to perform better in the first half of 2017. SNLN couldthus be a good pick for upcoming plays. Ityields around 4.41% annually.

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