Why FTSL Is Your High-Yield Lifeline in a Rising Rate World

In a world where the Federal Reserve keeps the pressure on, investors are scrambling for income that actually keeps up with inflation. Enter the First Trust Senior Loan Fund ETF (FTSL)—a high-octane income machine designed to thrive when rates rise. Let's break down why this fund isn't just a play for today's market, but a must-own for the next 12-18 months.

The Floating-Rate Secret Weapon

FTSL invests in senior floating-rate bank loans, which are loans to corporations that reset their interest rates quarterly or semi-annually. This means every time the Fed hikes rates, your income ticks up—no waiting for bond maturities. With the Fed's terminal rate now projected near 5.5%, these loans are primed to deliver 7%+ yields (see below).

The Numbers Don't Lie: 7.5% Yield with Rate-Hike Armor

As of May 2025, FTSL's 12-month distribution rate is 7.57%, and its 30-day SEC yield is 6.94%—both way above the 4%+ yields of 10-year Treasuries. But here's the kicker: these yields will grow as the Fed stays hawkish. Unlike fixed-rate bonds, which sink in value when rates rise, FTSL's loans have a weighted average duration of just 0.62 years. That's virtually immune to interest rate swings.

The fund's portfolio holds 249 loans, mostly to companies in sectors like software, insurance, and healthcare tech (18%, 12.8%, and 6.9% of assets, respectively). These are not fly-by-night firms—these are senior loans, meaning they're first in line if a company defaults.

Safety? Yes—But Not Without Risk

No investment is risk-free, and FTSL's B-rated debt exposure (55% of the portfolio) means defaults could hurt. However, the fund's diversification and floating-rate structure mitigate this. When rates rise, the loans' coupons adjust upward, giving borrowers more incentive to repay. Plus, 37% of loans have interest rate floors, ensuring income doesn't crater if rates dip.

Why Now Is the Time to Buy

The market is pricing in a Fed pause in 2025, but I'm betting the central bank stays firm to crush inflation. That means rates stay high, and floating-rate loans stay lucrative. FTSL's $2.34 billion in assets and $348k average daily volume ensure liquidity, even in volatility.

The Bottom Line: A 7%+ Yield with Rate-Hike Protection—Don't Sleep on This

FTSL isn't for the faint of heart—it's a high-yield, high-octane bet on a rate-sensitive economy. But with yields this strong and a structure that thrives when the Fed is aggressive, this ETF could be one of the best income plays of 2025.

Action Plan:
1. Buy now—don't wait for the next Fed hike.
2. Set a stop-loss at $44 (10% below current price) to protect gains.
3. Rebalance quarterly—if the Fed pivots, consider scaling back.

This is your chance to lock in 7%+ income while the Fed's back is against the wall. FTSL isn't just an ETF—it's a high-yield insurance policy against the Fed's next move. Don't miss it.

Disclosure: Past performance ≠ future results. FTSL's B-rated debt carries default risk.