The Wall Street Journal wrote, "'​Ultrashort' Bonds Beckon as Rates Rise." It explains, "Bonds with less than a year before they mature are increasingly seen as an alternative to money-​market funds. With the Federal Reserve'​s next interest-​rate rise all but certain in June and the stock market at or near highs, some investors are taking a more-​defensive approach. Historically, that has meant money-​market funds. But new rules have placed liquidity constraints on those funds. Rising interest rates also mean that investors could see fees creep up, effectively neutralizing much of the yield that makes money-​market funds attractive. As a result, "​ultrashort-​duration" bond funds and exchange-​traded funds are becoming more popular. About $​13 billion is in ultrashort bonds year-​to-​date through May 24, compared with $​8.​2 billion at the end of 2016, according to Morningstar data." The somewhat confusing piece adds, "Ultrashort-​duration bonds are bonds that are due to come to maturity in less than two years. These securities can sometimes be removed from bond indexes once the maturity date drops below one year, creating an opportunity for short-​term investors to pool them and capture the yield at maturity. The resulting performance of an ultrashort-​duration bond product often looks similar to or slightly better than that of a money-​market fund.... Still, there are key differences between money-​market funds and ultrashort-​bond products. For one, investors in the bond category will be taking on credit risk, however briefly. Vanguard Group, for example, advises investors in its Ultra-​Short-​Term Bond Fund (​VUBFX) to hold off on tactical moves as a way to manage some of this risk."

Your Name:
Your Email:
Recipient Email(s):

Use a comma or a semicolon to separate

Please retype symbols from the image:

Optional Message

Daily Link Archive