Is TRBUX a Strong Bond Fund Right Now?

On the lookout for a Investment Grade Bond - Short fund? Starting with T. Rowe Price Ultra Short-Term Bond (TRBUX) is one possibility. TRBUX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

TRBUX is classified in the Investment Grade Bond - Short segment by Zacks, an area full of investment potential. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. Fixed income instruments at this maturity level tend to have low duration risk, but they also pay out small yields compared to their longer-dated peers. Furthermore, these funds' focus on investment grade make them safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of TRBUX. T. Rowe Price Ultra Short-Term Bond debuted in December of 2012. Since then, TRBUX has accumulated assets of about $1.49 billion, according to the most recently available information. The fund's current manager, Alexander Obaza, has been in charge of the fund since March of 2020.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.4%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.08%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. TRBUX's standard deviation over the past three years is 0.54% compared to the category average of 6.1%. The fund's standard deviation over the past 5 years is 0.79% compared to the category average of 6.99%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For investors who think interest rates will rise, this is an important factor to consider. TRBUX has a modified duration of .59, which suggests that the fund will decline 0.59% for every hundred-basis-point increase in interest rates.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, TRBUX is a no load fund. It has an expense ratio of 0.31% compared to the category average of 0.67%. From a cost perspective, TRBUX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, T. Rowe Price Ultra Short-Term Bond ( TRBUX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Short, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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