Short-Term Bond ETFs Are Still Fashionable
Last year's rate cuts still linger in the minds of advisors and fixed income investors. They may be inclined to focus on intermediate-term and longer-dated bonds and the related ETFs.
SCHJ: Yield Curve Down Despite Shooting Inflation Expectations
Inflation expectations have spiked, raising doubts about the inflation battle and posing risks to CPI, especially with oil comps toughening MoM. SCHJ's 2.6-year duration isn't that high, but it's high enough considering the intensity of the inflation expectation spike and contradictory downward shift of the yield curve. Credit spreads have at least climbed a little, reflecting the complexity of the current landscape, which doesn't just concern anchoring risks but also inflation shocks from tariffs.
SCHJ: A Bond ETF To Keep Your Eye On
SCHJ holds 1-5 year investment-grade corporate bonds, with a balanced mix of A-rated and BBB bonds, primarily from the industrial and financial sectors. Rate cuts are expected in 2024, but the market has already priced in more cuts than likely, limiting SCHJ's appreciation potential. SCHJ offers a low-duration, low-price risk investment with a 4.54% yield, making it potentially suitable for income-focused investors with low-risk tolerance.
