More on Vanguard Ultra Short Bond
InvestorPlace published, "What to Expect From the Vanguard Ultra-Short-Term Bond Fund." Author Dan Wiener of the Independent Adviser for Vanguard Investors writes, "Vanguard intends to launch an actively managed Ultra-Short-Term Bond fund in February with a weighted maturity of zero to two years." (See Crane Data's Nov. 25 News, "Growing Interest in Chinese MMFs; Vanguard Launches Ultra Short BF," or see our November Bond Fund Intelligence publication for more.) The piece says, "What's most interesting about this new option is not that Vanguard is finally offering a low-risk way of dealing with rising interest rates, but that it has argued for some time that risks of investing in short-term or even intermediate-term bond funds are mitigated by the value of rising monthly distributions -- particularly when they are reinvested. The appeal of an ultra-short bond fund will probably be for those investors taking income distributions out of their holdings rather than reinvesting. Price moves will be small and yields should rise at a decent rate as interest rates rise. So, Vanguard's Ultra-Short-Term is not going to be a money market fund, but it also isn't going to be your typical short-term bond fund." It continues, "Ultra-Short-Term Bond's NAV can and will float. So, it's not a money market fund, as Vanguard took pains to point out. But risk should be low, and investors who can handle small changes in NAV may indeed find this fund a good alternative to a money market, one that likely will provide more yield and greater returns over time. Will Ultra-Short-Term Bond debut on schedule? That remains to be seen. In the past few years, Vanguard has cancelled or delayed several new fund launches." Also, ETF Trends writes "Short-term, Money Market Bond ETFs Reveal Rising Rate Expectations." It says, "Yields on ultra-short-term debt and bond-related exchange traded funds are rising, revealing increased expectations of a Federal Reserve rate hike. For example, the PIMCO Enhanced Short Maturity ETF has a 0.62% 30-day SEC yield and a 0.45 year duration. The Guggenheim Enhanced Short Duration Bond has a 0.34% 30-day SEC yield and a 0.47 year effective duration. The SPDR SSgA Ultra Short Term Bond ETF has a 1.59% 30-day SEC yield and a 0.27 year duration. The iShares Short Maturity Bond ETF has a 1.09% 30-day SEC yield and a 0.68 year duration."
