Despite the Federal Reserve’s intention to cut interest rates this year, investors may want to stick with fixed income investments – perhaps even increase them.
“Your biggest mistake could be jumping back into stocks before considering all of these options in fixed income,” Joanna Gallegos, co-founder and COO of BondBloxx, told CNBC’s “ETF Edge” this week.
Although the benchmark did not reach its peak of more than 5% at the end of 2023 10-year US Treasury bond The yield increased again last month. As of Thursday’s close, the yield was about 4.31%. On Wednesday it reached 4.429%, a high this year.
To effectively manage interest rate volatility, Gallegos suggests investors bet on exchange-traded funds that focus on intermediate-term bonds.
“As you move into the middle space, whether in credit or treasury, you take on some risk and will benefit from a total return tailwind as interest rates fall,” she said.
Tony Rochete of Morgan Stanley Investment Management recommends a similar medium-term strategy with instruments such as the Eaton Vance Total Return Bond ETF (EVTR) under his firm’s management.
“Currently the maturity is six years, the yield is about 6.6%,” the firm’s global ETF chief 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) as offering income opportunities.
“Also, last Monday here on the NYSE, we converted a municipal bond mutual fund into an ETF with the ticker EVSM, and that is a municipal bond fund. Again, 3 1/2% return, almost a taxable equivalent return of 6%. So these are very attractive interest rates in the current environment.”
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2024-04-04 23:00:01
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