The Fed Raises Rates Again; These Six Funds Benefit
On September 18, 2026, the Federal Reserve raised interest rates for the first time since early 2023. This move negatively impacted fixed-income funds like AGG due to its exposure to long-duration bonds that lose value when short-term rates rise. In contrast, floating-rate bond ETFs such as USFR and TFLO automatically adjust their yields in line with Fed rate changes, offering investors a way to benefit from the increase without duration risk. The article highlights several funds positioned well for this environment: JAAA returned 4.92% over the past year by focusing on high-quality CLO tranches, while CLOZ offers higher yield at greater credit risk with its mezzanine tranche strategy. Additionally, FLOT provides exposure to investment-grade corporate floaters and has outperformed Treasury-based funds due to a small but meaningful credit spread. The flattening 10Y-2Y yield curve suggests the market expects only limited further rate hikes, prompting investors to consider partial rotations into floating-rate instruments rather than fully abandoning traditional bond holdings.
Tickers: $AGG $FLOT $TFLO $USFR