FLOT: The Party Is Over (Rating Downgrade)
FLOT's floating rate bonds excel in rising interest rate environments but underperform in easing conditions, prompting a shift from 'Buy' to 'Hold'. The ETF's higher default risk and tight credit spreads make it less appealing compared to short-term bond funds like TBUX. FLOT offers a low 30-day SEC yield of 5.15%, with minimal spread over treasuries and short-term bond funds, reducing its attractiveness.
Weather Rate Volatility With FLOT
iShares Floating Rate Bond ETF is nice to avoid duration risk while benefiting from higher short-term yields amid volatile interest rates. Inflation declines are helped by lower oil prices, and sustained rate cuts are less likely in our view due to ongoing price increases by companies. We think the main chance for victory in the inflation battle is if the slightly lower oil and gas prices shift expectations, which are a persistent anchor above target rates.
FLOT: A Safe Harbour
The iShares Floating Rate Bond ETF is a low Beta, high quality, liquid ETF suitable for most short-term investors. It is designed to preserve wealth, not build it. The high-quality FRNs that FLOT invests in earn a premium yield to T-Bills, despite the fact that they are of similar credit quality. FLOT should continue to outperform money market instruments because the spreads it is locking in today will likely exceed the spreads on offer in a few years' time.
FLOT: Benign Credit Markets Suggest Investors Should Stay Invested
The FLOT ETF provides exposure to floating rate investment-grade bonds. The FLOT ETF has delivered a respectable 8.8% total return since April 2023 with a 5.9% yield. Revisiting my credit investment outlook, I believe following objective indicators like high-yield credit spreads may allow investors to stay invested for longer.
Floating Rate Bond ETF (FLOT) Hits New 52-Week High
For investors seeking momentum, iShares Floating Rate Bond ETF FLOT is probably on the radar. The fund just hit a 52-week high and is up 1.3% from its 52-week low price of $50.45/share.
