Ultra-Short Bond Fund


DEFINITION of 'Ultra-Short Bond Fund'

A type of bond fund that invests only in fixed-income instruments with very short-term maturities. An ultra-short bond fund will ideally invest in instruments with maturities around one year. This investing strategy tends to offer higher yields than money market instruments, with less price fluctuations than a typical short-term fund.

BREAKING DOWN 'Ultra-Short Bond Fund'

Ultra-short bond funds offer investors greater protection against interest rate risk than longer term bond investments. Since these funds have very low durations, increases in the rate of interest will affect their value less than a medium or long-term bond fund.

While this strategy offers more protection against rising interest rates, they usually carry more risk than most money market instruments. While certificates of deposits follow regulated investment guidelines, an ultra-short bond fund has no more regulation than a standard fixed-income fund.

  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  5. Fixed Income

    A type of investing or budgeting style for which real return ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
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