The iShares Short Treasury Bond ETF (SHV) offers a way to avoid duration risk and invest in the USD. Economic differences among countries are driving inflation and interest rate expectations. With a stronger US economy and higher inflation expectations, SHV’s low expense ratios make it an attractive option for long USD and short duration strategies.
Investors are extending bond portfolio durations to hedge against interest rate cuts and capitalize on a resilient US economy in 2024. The BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN) has garnered strong investor interest, offering exposure to US Treasury securities with an average 10-year duration. BondBloxx also expanded its ETF range to include credit-specific high yield bonds.
The Markit iBoxx USD Liquid Investment Grade Index is down 2.43% year-to-date, signaling reduced expectations for interest rate cuts. The VanEck Moody’s Analytics BBB Corporate Bond ETF (MBBB) stands out, offering attractively valued bonds with reduced downgrade risk. With a strong income stream and robust diversification properties, MBBB presents an appealing opportunity in the current market environment.
The Bloomberg U.S. Aggregate Bond Index is one of the most widely observed fixed income gauges in the world. And it serves as the benchmark
Investing in bond funds for retirement may not be as safe as it seems. The Bank of England’s struggles with bond investing highlight the risks, especially as interest rates change. Personal investors using bond funds or ETFs face valuation and volatility issues, leading to substantial losses. Careful consideration and diversification strategies are essential for successful bond investing.
Short-term bonds, with maturities of 1-3 years, offer low-risk, steady income. The BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO) is a popular option, providing a 30-day SEC yield of 4.20%. While not likely to deliver high returns, short-term bonds are less volatile and can be beneficial during periods of declining interest rates and inflation.
Eaton Vance’s Intermediate Municipal Income ETF (EVIM) offers a compelling opportunity in the current economic environment. With skilled active management and decades of experience, it provides diversified exposure to the municipal bond market. EVIM holds 59 securities with an average duration of 5.76 years, offering income exempt from regular federal tax. This ETF could help limit portfolio risks.
The recent ETF Exchange conference highlighted the resurgence of bonds, despite underwhelming returns of the Bloomberg U.S. Aggregate Bond Index. With the AGG showing negative returns, active fixed income ETFs are gaining attention for their liquidity, transparency, and potential to adapt to market volatility, offering investors a compelling alternative.
BBB-rated corporate bond ETFs present a compelling investment opportunity, outperforming the Bloomberg US Corporate Index over 1-5, 5-10, and 10+ year maturity periods. With near 13-year high yields and historically low default rates, these bonds offer long-term spread advantage. Investors can consider BBBS, BBBI, and BBBL ETFs for different maturity ranges. Source: ETF Trends.
The uncertainty surrounding Federal Reserve interest rate adjustments has prompted fixed income investors to consider taking on more bond risk, particularly with corporate bond exchange traded funds. The WisdomTree U.S. Corporate Bond Fund (WFIG) is highlighted as an attractive option due to its high-quality status and potential for outperforming in the face of rising default rates expected in 2024.
In 2024, investors have shifted focus to intermediate and longer-term fixed income ETFs, aiming to secure higher yields amidst anticipation of Fed rate cuts. BondBloxx ETFs have seen notable activity, with flows into the XTEN fund surging, while shorter-duration treasuries still attract some interest. The firm’s recent introduction of BBB-rated corporate bond ETFs expands its suite.
Yields on 10-year Treasury bonds have doubled due to Federal Reserve rate hikes. Higher yields benefit investors, but come with risks. Mistakes to avoid include complacency with cash, overallocation to safe yields, overlooking inflation, chasing high yields, and ignoring proper asset location to minimize tax impact on returns.
In 2024, the fixed income market is expected to see a shift as the Federal Reserve plans potential rate cuts. Despite ongoing market volatility, there are opportunities for investors, such as securitized assets and agency mortgage-backed securities. WisdomTree’s Fixed Income Model Portfolio has a strong track record of outperforming the Bloomberg U.S. Aggregate Bond Index.
Portfolio Manager Eric Fine discusses the benefits of emerging market bonds over developed market bonds, highlighting higher yields, earlier and larger central bank hikes, and lower government debts and deficits. He also identifies global risks, emphasizing geopolitical and fiscal concerns, and points out why emerging markets may be insulated from these risks.
