Investors are being advised to consider sticking with fixed income investments despite the Federal Reserve’s plans to cut interest rates this year. BondBloxx co-founder and COO Joanna Gallegos warns against rushing back into equities and suggests exploring the opportunities in fixed income. The benchmark 10-year U.S. Treasury note yield has recently reaccelerated, hovering near 4.31% as of Thursday’s market close. Gallegos recommends looking into exchange-traded funds focused on intermediate term bonds to effectively manage interest rate volatility. By investing in the intermediate space, investors can take on some risk and benefit from a total return tailwind when rates go down.
Morgan Stanley Investment Management’s Tony Rochte also suggests a medium-term strategy with vehicles like the Eaton Vance Total Return Bond ETF (EVTR) under his firm’s management. With a 6-year duration and 6.6% yield, Rochte describes it as a “best ideas portfolio.” He also points to municipal bond funds like the Eaton Vance Short Duration Municipal Income ETF (EVSM) for income-generating opportunities. Rochte highlights the recent conversion of a municipal bond mutual fund to an ETF, symbol EVSM, which offers a 3.5% yield and almost a 6% taxable equivalent yield. These rates are considered attractive in the current environment, providing investors with income-generating opportunities.
In a market environment where interest rates are expected to be cut by the Federal Reserve, investors may find fixed income investments to be a more stable option compared to equities. Gallegos emphasizes the importance of considering all opportunities in fixed income before rushing back into equities. The recent reacceleration of the benchmark 10-year U.S. Treasury note yield indicates a potential benefit for investors looking into intermediate term bonds. By investing in exchange-traded funds focused on intermediate term bonds, investors can effectively manage interest rate volatility and capitalize on total return tailwinds when rates go down.
Rochte agrees with Gallegos’s sentiment and recommends a medium-term strategy with vehicles like the Eaton Vance Total Return Bond ETF (EVTR) for investors looking to navigate interest rate cuts. With a 6-year duration and 6.6% yield, the ETF is considered a best ideas portfolio by Morgan Stanley Investment Management. Rochte also points to the attractiveness of municipal bond funds like the Eaton Vance Short Duration Municipal Income ETF (EVSM) for income generation. The recent conversion of a municipal bond mutual fund to an ETF, symbol EVSM, offers a 3.5% yield and nearly a 6% taxable equivalent yield, presenting investors with appealing rates in the current market environment.
Despite the Federal Reserve’s intentions to cut interest rates, investors may benefit from sticking with fixed income investments rather than rushing back into equities. The recent reacceleration of the 10-year U.S. Treasury note yield highlights the potential opportunities in the fixed income space. Gallegos recommends exploring exchange-traded funds focused on intermediate term bonds to effectively manage interest rate volatility and take advantage of total return tailwinds. Rochte also supports this approach and suggests a medium-term strategy with vehicles like the Eaton Vance Total Return Bond ETF (EVTR) for investors seeking stability and income generation opportunities in the current market environment.
Overall, investors are urged to carefully consider fixed income investments as a viable option amidst the Federal Reserve’s plans to cut interest rates. By focusing on opportunities in the fixed income space, investors can benefit from potential total return tailwinds and income generation. Vehicles like the Eaton Vance Total Return Bond ETF (EVTR) and municipal bond funds like the Eaton Vance Short Duration Municipal Income ETF (EVSM) offer attractive yields and stability in a market environment marked by interest rate cuts. Sticking with fixed income investments could be a prudent approach for investors looking to navigate potential market volatility and uncertainty.
