BKLN Stock Recent News

The Federal Open Market Committee closed 2024 with its third consecutive reduction to the overnight borrowing rate, while Chair Jerome Powell suggested the pace of rate cuts is likely to slow in the coming year or more. Though the Fed lowered rates multiple times in recent months amid strong economic growth and easing inflation, there is broad uncertainty about how these two metrics will shift into the new year.

Investors are closing the books on another eventful year — marked by record highs for the major stock market indices, record action in Treasury yields and record assets and flows into ETFs. 2024 was also marked by a much-debated pivot from the Federal Reserve, a dramatic Republican sweep in Washington, and plenty of geopolitical turmoil.

As investors prepare portfolios for the new year, four fixed income ETFs are worth consideration for 2025. 1. Invesco Senior Loan ETF (BKLN) As investors look for fixed income ETFs well-positioned for 2025, bank loans should not be overlooked.

An upbeat job market and moderately cooling inflation may prevent the Fed from opting for significant rate cuts in the near future.

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The BKLN ETF has performed well with 4.1% returns in 6 months due to lower-than-expected loan defaults and low credit spreads. However, forward returns for BKLN are expected to trend lower as the Federal Reserve cuts short-term interest rates, impacting leveraged loan yields. With expected forward returns of ~6%, I am maintaining my hold rating at this time.

BKLN is the largest senior loan ETF in the market. Although it has outperformed these past few years, coming rate cuts are a significant headwind. BKLN's 0.65% expense ratio is higher than average, and a significant long-term negative.

The Invesco Senior Loan ETF is a risky but potentially high-reward proposition for investors expecting interest rate cuts but don't want to bet on when they'll start. BKLN primarily contains junk debt, and that's the biggest risk if higher-for-longer goes on indefinitely. This ETF offers a risky but attractive near-9% yield for 'waiting out the Fed', in a manner of speaking. Risk is high, but it's a Buy.

The Federal Reserve continues to hold fast to its highly data-driven, wait-and-see approach on rate policy. Last week's FOMC meeting further bolstered the market's belief in a lone rate-cut scenario, and senior loan ETFs have gained traction as elevated rate expectations spill over into the second half of the year.

While markets mull over when the Federal Reserve will begin rate cuts, investors are evaluating where to allocate investments. Justin Danfield, Fixed Income ETF Strategist at Invesco, noted that bond investing presents an attractive option for investors.