Floating Rate Instruments Gain Traction Amid Economic Uncertainty
As interest rates remain volatile, floating rate notes (FRNs) and collateralized loan obligations (CLOs) are emerging as strategic tools for investors seeking income while mitigating rate risk. VanEck's analysis highlights their appeal in an environment of uncertain inflation dynamics and potential rate hikes.
FRNs, with their variable interest rates, offer a hedge against rising rates, while CLOs provide diversified exposure to loan pools—albeit with higher risk. The current market sentiment reflects a growing preference for these instruments as safeguards against monetary policy fluctuations.