SGOV - SGOV: If The Fed Cuts Rates An Interesting Yield Play For Some Time
2024-05-21 09:00:00 ET
Summary
- SGOV, an ETF focused on 0-3 month Treasury bonds, remains an attractive option for income investors in a higher-for-longer rate environment.
- SGOV has generated a 1.72% return since January 22nd and offers a yield of over 5%.
- The yield curve normalization and potential Fed pivots are risks to SGOV's yield, but it remains a safe haven for generating income.
There is a whole segment of the investment community that focuses on generating income from their allocated capital. If you're reading this article, there is a strong possibility that you have exposure to income-producing assets, whether they are dividend-paying stocks or risk-free assets such as CDs or treasuries. If not, then the idea of generating passive income has piqued your interest. If you follow me on Seeking Alpha , then you have probably seen some of my articles where I discuss different income ideas from individual equities to business development corporations ((BDC)). I don't own treasuries directly, but the iShares 0-3 Month Treasury Bond ETF ( SGOV ) has become one of the proxies for cash that I utilize to generate income. Since the November 2023 FOMC meeting, we have seen the odds of a rate cut increase going into 2024 and heading into the March Fed meeting. Since then, the door has been closed on a March pivot, and the May meeting concluded with the Fed maintaining rates at their current level. We're almost halfway through 2024, and the Fed has not pivoted, and we seem to be in a higher for longer rate environment. I do believe that the Fed will pivot in 2024, but I don't think rates are going to decline as quickly as some may want them to. I think SGOV will continue to be an attractive proxy for cash as it's still yielding over 5%, and investors can exit the position instantly. If you are looking for a place to park cash, SGOV has been a winner in the higher-for-longer environment, and I think it will continue to perform well....
SGOV: If The Fed Cuts Rates, An Interesting Yield Play For Some Time