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Cut the Duration, Keep the Income With This ETF

BY | ETF Database
6:47 am ET 07/23/26 | 22 VIEWS
To the dismay of advisors and fixed income investors, the words “clear” and “overt” seem to have left the Federal Reserve’s lexicon. However, there are avenues for investors looking for the combination of elevated income and reduced rate risk.The WisdomTree Interest Rate Hedged High Yield Bond Fund (HYZD C) is one of the ETF’s that accomplishes those objectives. The $260.2 million HYZD, tracks the WisdomTree U.S. High Yield Corporate Bond, Zero Duration Index. It could be a valuable tool as new Fed Chairman Kevin Warsh scrutinizes the central bank’s data inputs, balance sheet, and commentary on rates. “In terms of forward guidance, investors have already witnessed the Chairman’s plans where the goal is to essentially remove this form of communication to the markets,” observed WisdomTree. “Some clear-cut examples were the scaled back, just the facts, Greenspan-esque, June FOMC policy statement as well as Warsh’s non-participation in the dot plot. The balance sheet question will take longer to resolve, but the examination of the data the Fed uses to set policy deserves some attention.”How HYZD Gets the Income Job DoneHYZD turns 13 years old in December. It carries a 30-day SEC yield of 6% and an effective duration of 0.30 years. For many investors, that high yield and low duration would be enough. No further examination required. However, it is worth digging deeper into HYZD. Even with that outsized yield, investors aren’t subject to deep credit risk because HYZD’s index employs a screen that weeds out the flimsiest issuers, resulting in a quality portfolio. Nearly two-thirds of the ETF’s holdings are rated BBB. As WisdomTree puts it, HYZD is “high-yield without ‘junk.’” HYZD’s investment-grade status is all the more important today because it’s likely the Fed won’t be cutting rates anytime soon. Junk-rated corporate issuers are often sensitive to interest rate fluctuations because they’re more dependent on issuing debt to fund operations. Said another way, HYZD can thrive even without Fed assistance. “Back to the important part of the New ‘Warsh’ Cycle: where are rates headed? It has become increasingly apparent that the curtain has closed for rate cuts,” added WisdomTree. “According to the June dot plot, half of the Fed (Warsh not included) saw rate hikes as the next policy step, and even the Chair himself seemed committed to their 2% inflation target and to ‘fix’ five years of misses on inflation. While our base case is for the FOMC to stay on hold for the remainder of 2026, if there’s any tilt going forward, it’s now for a potential rate hike.” For more news, information, and analysis, visit the Modern Alpha Content Hub.DisclosuresThis article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.  WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.

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