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Schwab Plans 3 Ultra-Short-Bond ETFs

Schwab Plans 3 Ultra-Short-Bond ETFs

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Schwab filed paperwork proposing three short-term, target-duration bond funds, the latest sign that fund sponsors are looking to provide investors with more choices to effectively manage an environment of rising interest rates.

  • The Schwab TargetDuration 2-Month ETF
  • The Schwab TargetDuration 9-Month ETF
  • The Schwab TargetDuration 12-Month ETF

While the filing came just two days after the Fed’s decision to continue its monthly $85 billion bond-buying program, investors have begun in recent months to shift bond holdings to the short end of the yield curve to manage interest-rate risk before the Fed begins to normalize borrowing rates. The three Schwab funds fit the bill perfectly, allowing investors to eke out a bit of return without the heightened risk that bond investments further along the curve can subject them to.

All three funds will make use of similar investment and security-selection strategies, with the principal difference between the three being their respective target durations of two, nine and 12 months.

The securities within the funds’ portfolios will be investment-grade, dollar-denominated debt from U.S. as well as foreign issuers. The debts purchased by these funds will have a rating of or be equivalent to at least A- per Standard & Poor’s Financial Services.

None of the funds yet has a ticker or price, but the prospectus did say that the three funds would have their initial listings on the New York Stock Exchange’s electronic platform, Arca.

 

 

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