Traders Piling Into Floating-Rate ETFs Are Warned Best Days Are Over

Bank-loan ETFs have attracted more than $1 billion in September — the biggest monthly inflow since June 2021 — led by the $5 billion Invesco Senior Loan ETF ’s $920 million haul, Bloomberg Intelligence data showed. Meanwhile, the largest ETF tracking collateralized loan obligations has nearly doubled in size this year.

But while higher yields are attractive for income-oriented investors, the set-up is a “double-edged sword” because steeper rates could be tough for leveraged borrowers to handle, particularly if corporate profits get crimped in a slowdown, said Collin Martin, fixed income strategist with the Schwab Center for Financial Research.

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