Investors may want to stick with — or even increase — fixed-income investments despite the Federal Reserve’s plans to cut interest rates this year.
“Your biggest mistake might be rushing back into stocks before considering all of these opportunities in fixed income,” BondBloxx co-founder and COO Joanna Gallegos said this week. ETF Edge” from CNBC.
Although beyond its peak of more than 5% at the end of 2023, the benchmark index 10-year US Treasury bond performance has reaccelerated over the past month. As of Thursday’s market close, the yield was hovering around 4.31%. It touched 4.429% on Wednesday, a high for this year.
To effectively manage interest rate volatility, Gallegos suggests investors look to exchange-traded funds focused on medium-term bonds.
“If you get into the middle space, whether it’s credit or Treasuries, you’re taking some risk and you’re going to get a total return tailwind when rates go down,” he said. she declared.
Tony Rochte of Morgan Stanley Investment Management recommends a similar medium-term strategy with vehicles like the Eaton Vance Total Return Bond ETF (EVTR) under his firm’s leadership.
“It’s currently a 6-year term, yielding around 6.6%,” the firm’s global head of ETFs said in the same interview. “It’s a portfolio of the best ideas.”
Rochte also pointed to municipal bond funds, like the Eaton Vance Short Duration Municipal Income ETF (EVSM), for income-generating opportunities.
“We also converted a municipal bond mutual fund last Monday here at the NYSE into an ETF, symbol EVSM, and it’s a municipal bond mutual fund. Again, a 3 1/2 percent yield, which is almost a taxable equivalent yield of 6%. These are therefore very attractive rates in the current context.”
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