Major indexes fell on Friday, as sovereign bond yields rose across the globe. Specifically, the U.S. 30-year Treasury bond yield hit its highest level in around a year. In this scenario, floating-rate bond exchange-traded funds (ETFs) offer an attractive investment option because they adjust their payouts based on prevailing interest rates. Consequently, they stand to benefit if bond yields remain elevated amid expectations that the Federal Reserve could either keep interest rates higher for longer or even raise them further.
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Here, we will look at three floating-rate bond ETFs offering more than 4% yields: VanEck Investment Grade Floating Rate ETF (FLTR), iShares Floating Rate Bond ETF (FLOT), and Janus Detroit Street Trust Janus Henderson AAA CLO ETF (JAAA).
TipRanks’ ETF Comparison Tool gives a snapshot of these ETFs across key metrics.
VanEck Investment Grade Floating Rate ETF (FLTR)
The FLTR ETF tracks the MVIS US Investment Grade Floating Rate Index and provides exposure to U.S. dollar-denominated investment-grade corporate floating rate notes. FLTR’s floating rate coupons reset periodically, resulting in minimal rate sensitivity. Also, it ensures stability by including debt securities issued by top-tier corporations with robust credit ratings.
Notably, the FLTR ETF has paid about $1.217 per share in dividends over the past year. It offers a dividend yield of 4.77%
iShares Floating Rate Bond ETF (FLOT)
The FLOT ETF tracks the Bloomberg US Floating Rate Note < 5 Years Index (USD). It provides exposure to investment-grade floating rate bonds and seeks to reduce interest rate risk while offering income from corporate debt. It is suitable for investors seeking to mitigate interest rate risk while desiring stable income opportunities.
The FLOT ETF has paid about $2.344 per share in dividends over the past year. It offers a dividend yield of 4.6%.
Janus Detroit Street Trust Janus Henderson AAA CLO ETF (JAAA)
The JAAA ETF tracks the J.P. Morgan CLO AAA Index and provides exposure to high-quality collateralized loan obligations (CLOs). This ETF capitalizes on the dynamic nature of floating interest rates, which can be beneficial in rising rate environments, potentially enhancing portfolio yield while mitigating interest rate risk.
With dividends of about $2.548 per share paid over the past year, the JAAA ETF offers a dividend yield of 5.03%.
