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It appears unlikely that the Fed will lower interest rates this month. And with some recent data points indicating inflation is again perking up, the timeline for rate cuts is arguably murky.
Morgan Stanley Investment Management's active senior loan ETF is a compelling offering in the current environment. Investors have increasingly looked to senior loan ETFs in recent history instead of high yield bonds.
Senior loans have the highest yields in the fixed income space right now. Yields will decline as the Fed cuts rates, but seem likely to remain competitive for several years regardless. BKLN is the largest senior loan ETF in the market, and its 8.7% yield would likely remain competitive even if the Fed cuts rates.
Invesco Senior Loan ETF is a high-yield fund that aims to generate income while maintaining share price stability. Senior loans have priority in repayment and are backed by tangible assets, making them less risky. Their floating rate also gives some price stability. BKLN has a high expense ratio and its distribution history has been inconsistent, but it currently offers a good dividend distribution yield of 8%.
Four funds in Invesco's lineup of fixed income ETFs saw strong flows in November. Last month, investors largely chose to stay investment grade while stretching out duration a bit further.
VRIG: Floating Rate Investment Grade Securities May Not Be The Best Bet Right Now
Hello, VettaFi Voices! The Wall Street Journal mentioned today that the 10-year Treasury yield is the highest it's been since 2007 as we head into another earnings season.
Investors are flocking to Invesco's bank loan ETF, a fund known for providing attractive income. In the current environment, investors who want to generate as much yield as possible might look to bank loans instead of high yield bonds.
Overall, ETFs pulled out $6.7 billion in capital last week, with U.S. equity ETFs leading the way with $8.1 billion in outflows.
The Fed's indication of a potential credit event may lead to widening credit spreads, making the Invesco Senior Loan ETF attractive for investors. The ETF offers a compelling yield of 8.38% and protection during market downturns due to its investment in senior secured loans. However, the fund carries credit and interest rate risks, and its heavy concentration in the U.S. market makes it risky at the moment.