Build Asset Management, an asset management firm specializing in strategies focused on fixed income and options, just launched the BUILD Bond Innovation ETF (NYSE Arca: BFIX), a bond allocation fund designed for a modern global environment defined by low interest rates and constrained economic growth.
Xtrackers by DWS has launched an ETF providing dynamic risk-controlled exposure to U.S. dollar high-yield corporate bonds.
Business loans are picking up, which can open up opportunities for savvy fixed income investors looking to get extra yield.
For example, the Simplify Interest Rate Hedge ETF (PFIX) seeks to hedge interest rate movements from increasing long-term interest rates.
“The Climate Bonds Initiative has revealed that it certified more than $200bn of bonds in 2021, from more than 220 issuers, marking a record high,” reports Edie.
Sovereign issuers are taking advantage of the new standards to bring more green bonds to market.
The majority of the outperformance in 2021 came from the energy sector, where fallen angels are overweight the broad high yield index by more than 2x,” writes Nicolas Fonseca, VanEck associate portfolio manager.
Bonds with a higher credit risk can offer attractive yields, but for the more risk-averse investors, quality is needed to ensure stability of income.
“An index of debt issued by developing nations denominated in their own currencies has returned about 1% over the past three months, while a similar gauge of hard currency bonds has tumbled 2.9%, according to data compiled by Bloomberg,” reports Bloomberg outperformance has come amid optimism the proactive central-bank policy was enough to get ahead of inflation, and should mean that further tightening is now less necessary into 2022
“Wall Street’s biggest banks are expected to hit the corporate bond market after they report quarterly results in an effort to raise money before the Federal Reserve knocks borrowing costs higher,” Bloomberg reports.
BNDW seeks to track the performance of the Bloomberg Global Aggregate Float Adjusted Composite Index, which measures the investment return of investment-grade U.S. bonds and investment-grade non-U.S. dollar-denominated bonds.
Bond exchange traded funds still have a place in a portfolio as a diversifier against risk selling pressures, with Wall Street indexes retreating and technology stocks lagging behind.
Investors looking to strengthen their fixed income portfolios can consider the Avantis Core Fixed Income ETF (AVIG), which invests in a broad set of debt obligations across sectors, maturities, and issuers.
Charles Schwab has trimmed the fees on five fixed income ETFs that provide core Treasury and corporate bond exposure.
Given the current market landscape, investors can opt for Treasury inflation-protected securities (TIPS), short-duration, and high-dividend yields.
“Owning bonds today is still relevant because they provide steady income and protect portfolios when risky assets fall,” Wendling added.
In fixed income, across many sectors, across corporate, government, mortgage-backed securities, the 1-3 year space tends to have a higher Sharpe ratio, so the risk/return profile tends to be better
We also think that AA-rated CLOs will look good compared to a blend of lower-quality investment-grade, and that the securitized market itself is a place for opportunity going into 2022.
